Seaward describes Clarks now as being completely retail-led and an important factor of the commitment they require from their suppliers is that they expect to be the first to see all new leathers. This gives them an edge on early development.
They are very clear about what they want and require consistent bulk deliveries on time. They will allow very little leeway and give no third chances. They are continually looking for a reduction in costs without a reduction in quality. An important objective is good consistent specified quality.
He said that the reality is that people do not deliver what they say they will. While they are willing to discuss problems, they need tanners to have more will to meet their contracts. Seaward joked that the thickest book in the world is called Tanners’ Excuses.
They expect tanners to carry out their own physical testing and provide letters of conformity with every delivery. However, they find that the conformity lasts for around six months and then peters out so monitoring is needed at all times.
Tanners need to be more open about what they can do rather than what they’d like to do. In addition Clarks want early and good information from them. They have a process for supplier assessment and want to work with companies which are financially sound and environmentally reliable. And they need feed back on their own shortcomings.
According to Seaward, Clarks have changed in the past five years, out of all recognition to the company he joined 25 years previously. The company now have a worldwide turnover of £876 million and own seven factories. They made 9.2 million pairs of shoes last year and sourced a further 27.2 million, selling 38 million pairs in total.
Clarks may have started life as a manufacturer of shoes and slippers in 1825 but they are now very much a retail company with some manufacturing interests.
Changes came with a new chief executive who brought with him new perspectives. Over the past five years, they have stripped out several layers of staff and now have no internal marketing/selling interface.
The marketing role of the company, today, is to develop the shoes they think the customer wants, and put them into the shops. Once they have decided what they think customers will want, absolutely everything is specified – buckles, laces, components, leather.
They now use a very small number of suppliers, building close relationships with them. Their suppliers are required to present their ranges over a 2-3 day period.
Designers take a look at the leathers and then decide which they will use while the tanners wait in another room. This way the tanner will know almost immediately if his leather is in the mix. They aim to specify early with autumn/winter 2003 products specified by June 2002.
They are committed to the Far East, where most of their production is sourced from, although there are still four factories in the UK and two in Portugal, mostly assembling shoes with imported uppers from India.
Clark’s policy is to use authentic leather from tanners’ own ranges, along with authentic designs, avoiding using suppliers involved in ‘knocking off’ other companies’ products. In response to a question, Seaward said that Clarks were not looking currently to specify leather from Asia despite the fact that the main production sources were now Vietnam (for children’s shoes) and Cambodia for their women’s line. Around 40% of the total UK pairage had been transferred to the Far East in the past year. Importing from China had been affected by quota restrictions.
They still buy from the UK and Italy but need a really good reason in terms of technology or look. Currently, South America is their biggest supplier. He admitted that European tanners would experience difficulties in meeting their price points. However, while the lack of support for European tanners is a matter of concern, commercial reality requires them to look further afield.
The company issue a promise of durability, with an invitation to consumers to return shoes if they are dissatisfied. They are committed to the use of leather but are also investigating the use of laminates.
While the business is retail-led and there is a continuing massive deflation (down 10-15%), there is a great need to control prices. Since leather represents 45% of the cost of a shoe, working back from retail price points, price limits for leather were set at:
$2.60/sq ft for men’s
$2.20/sq ft for women’s
$1.95/sq ft for children’s.
Anything above these prices must offer something special to sell on. In Europe, retail price points peak at €99 for volume men’s shoes and €79 for women’s. If prices rise above this level, the volume immediately falls back.
Children’s shoes are only sold in the UK. Over one-third of the 7.5 million are sold in the six-week ‘back to school’ period at the end of the summer. For this reason, delivery times are extremely important. If you miss the window, you don’t sell the shoe.
Chromium in shoes is not considered to be an issue but leather is seen as one of their biggest challenges in terms of quality, innovation, consistency and cost. The important factors are: price, delivery, quality, innovation.
The company work on lead times of seven weeks from order to delivery although this has not been achieved in all cases so far. He stressed that they relied on quick response/reliable timing.
Clarks have been targeted by organisations such as PETA but had worked with them to comply with their wishes. However, they feel that PETA have ‘moved the goal posts’. They consider that PETA’s criticisms of India regarding the treatment of cows had been justified but that the subsequent complaints about Indian buffalo calf had been successfully refuted.
Missed attendance
President Tony Mossop said that they had received a number of apologies for absence and that the previous president had said last year that this reflected the many challenges and changes faced by the industry in all parts of the world and the increasing pressure on companies and executives:
‘Things haven’t changed for the better and you will all know as well as I do what a difficult period most of the world’s tanning industry has been through over the past twelve months.
‘I think everyone in our industry worldwide is facing serious challenges, some longstanding and some relatively new… But I think that at times of difficulty and challenge, it is all the more important that we take the opportunity to talk about the issues affecting our businesses.’
He alluded to discussions about the Number 6 International Contract and the fact that they had experienced differences with ICHSLTA. ‘Last year, you may recall, our Italian colleagues submitted a detailed proposal on how they would like to see the contract modernised, made more user friendly and more suitable for use by tanners.’
This was agreed by the ICT membership as the foundation for a discussion with ICHSLTA to establish a new basis for the International Contracts, but at the last meeting between the two organisations, ICHSLTA said they were not prepared to reopen discussions on the contract for the time being.
The initial position of ICHSLTA was that they would not start discussions before 2004 but they later agreed to put to their council a proposal to bring this forward to 2003.