CIT BANKRUPTCY FILING

Provided by Gary Wassner for CFDA “From the Experts”

In light of CIT’s recent bankruptcy filing, there are two critical questions that we all need to ask. The first is: has CIT succeeded in reducing its debt to equity ratios enough to be able to borrow competitively when it emerges from Chapter XI? The second is: what assets has CIT pledged to its bondholders and lenders in order to secure the agreements and DIP funding that it has arranged?

Before I clarify the importance of each of these questions, I’d like to state a few things that I’ve yet to see mentioned in any articles on the subject of CIT’s struggle. Hasn’t CIT done exactly what the Obama administration and Shelia Bair requested of it and other companies in similar situations whom the government has denied additional funds to? Hasn’t CIT looked to the private equity market and/or internally to raise equity? All the efforts the Board of Directors made to preserve the company should be commended. The Board attempted to strengthen its balance sheet, under very difficult circumstances, by inducing its debt holders to convert their debt to equity. CIT failed out of court and finally reverted to a pre-packaged Chapter XI bankruptcy to achieve what was asked, and in fact, required of them to survive. They were previously denied further federal funds. What choices remained? So, rather than being bailed out once again, they did what they had to do. This was how the free market functioned prior to TARP and the financial meltdown. Unfortunately, CIT is still at a significant disadvantage going forward since the cost of money that will be funding the Chapter XI in many cases is higher than what CIT earns on the loans it currently has on the books to its customers. That’s the irony of CIT having accomplished this in the manner in which they did, while other companies, considered to be more ‘systemic’ have been able to avail themselves of cheaper federal funds on an ongoing basis, allowing them to be more competitive and giving them an advantage that CIT does not currently have.

So, now if I go back to my original questions, I’ve basically answered the first one. The Bank of America is providing a DIP financing line at 2.5 over prime. That’s a better rate than what Goldman provided during the months since July 2009 until the filing this past weekend, but it is higher than the rate it lends much of its money to its clients. That we can all easily see is a model doomed to failure. If CIT has strengthened its balance sheet enough through the wiping out of stockholder equity and TARP obligations, will the Fed open its lending window to it now? Will it be able to come out of bankruptcy and borrow competitively going forward? Without that ability, how can it reasonably return to profitability?

The second question is just as critical. If you are a client of CIT’s Trade Finance division, have your accounts receivable been pledged as assets of the bankruptcy to the bondholders and/or DIP lenders as collateral? This is a question that should be easy for them to answer since the filings are now public. If they have securitized these assets and in the worst case, the bankruptcy turns into a liquidation, what will that mean to your company?

I am one of the first who has spoken out in support of CIT and who believes that a healthy CIT Trade Finance is crucial to the apparel industry. It is the consummate professional in this industry. It has provided funding to small and mid-size companies that has been flexible and fair, and it has supported the infrastructure of this industry for 100 years. CIT Trade Finance did not dig the hole that it has been dragged into. I hope and believe that CIT will continue to be a force in factoring and finance, regardless of what happens to the other divisions of the Corporation. But it also needs to understand the anxiety that all of this turmoil has caused us in the industry. The management of CIT Trade Finance needs to work with all of us who have critical stakes in their future, as the partners they have always been in the past. Information and transparency is so important when markets are unstable and the road ahead is unclear. CIT should realize the value of the endorsement it has from its clients and attempt to comfort them during this time of crisis as best as it can. The value of CIT Trade Finance lies in its customer base. It shouldn’t look at its clients as adversaries but as vital pieces of the puzzle which will eventually constitute its future. CIT needs to help us all to understand what we gain and what we risk in this regretful and tumultuous situation. Support us all and we will support CIT. Be creative with its clients. Be honest and proactive. Ease our anxieties. Our industry needs this company, but CIT also needs our industry. When we emerge from this crisis, we hope to emerge as partners once again.

By Gary Wassner / President / Hilldun Corporation / gary@hilldun.com / www.hilldun.com

If you have any further questions, please feel free to contact Gary via email.

THE DANGER OF PREFERENCE, AND I’M NOT TALKING ABOUT TASTE

Provided by Gary Wassner for CFDA “From the Experts”

In the midst of today’s turbulent retail environment, the last thing in the world any manufacturer would want to have happen is to find out, after you’ve been paid by a store for merchandise you shipped according to their order, on time and without any dispute after shipping, that the payment is being recalled from you by a bankruptcy trustee. You’d have no choice but to return the funds you received if the trustee is claiming Preference, even if you were paid 90 days before the store filed for bankruptcy.
Provided by Gary Wassner for CFDA “From the Experts”

In the midst of today’s turbulent retail environment, the last thing in the world any manufacturer would want to have happen is to find out, after you’ve been paid by a store for merchandise you shipped according to their order, on time and without any dispute after shipping, that the payment is being recalled from you by a bankruptcy trustee. You’d have no choice but to return the funds you received if the trustee is claiming Preference, even if you were paid 90 days before the store filed for bankruptcy.

Preference recoveries are frustrating and dangerous, and seem terribly unfair, but they are designed to protect all the general creditors when a company files for bankruptcy. They are not designed to hurt the creditor who was paid early for the merchandise they shipped, even though it may often seem so.

So, what is preference and why should you, as a manufacturer/designer be concerned about it? Moreover, what can you do to protect yourself from being the victim of a preference claim?

I’m not a lawyer, so I’m going to try to translate the Bankruptcy code into laymen’s terms, and thanks to an article written by Bruce Nathan, Esq, a partner at Lowenstein Sandler PC and an associate and friend, this task will be much easier. Section 547B of the Bankruptcy code allows a trustee in charge of the assets of the bankrupt to recover previous payments under the following circumstances:

a) The debtor transferred its property, such as making payment, to or for the benefit of a creditor;

b) The transfer was made on account of the antecedent or existing indebtedness that the debtor owed the creditor;

c) The transfer was made when the debtor was insolvent. A balance sheet definition of insolvency, liabilities exceeding assets, is used. The statute also makes it easier for a trustee to prove a preference by creating a presumption of the debtor’s insolvency within the 90-day preference period;

d) The transfer was made within 90 days of the debtor’s bankruptcy filing, in the case of transfers to non-insider creditors, and within one year of the bankruptcy for transfers to insiders of the debtor, such as the debtor’s officers, directors, controlling shareholders and affiliated companies; and

e) The transfer enabled the creditor to receive more than the creditor would have recovered in a Chapter 7 liquidation of the debtor. This requirement is always satisfied unless the debtor’s unsecured creditors receive full payment of their claims.

What does this all mean? It means that if you ship a store on time, a store you’ve done business with before and may even have open invoices with at the time you ship them again, and then subsequent to delivering the merchandise, you fear that they are in financial trouble and you therefore request that they pay you earlier than the terms of the invoice, whatever they pay you will be subject to a recovery by the trustee if the store does file for bankruptcy within 90 days of that payment and meets the rest of the criteria above. You may think you’ve saved yourself from a loss, when in fact you have not at all. Once the store files, the trustee will examine all the payments made within the previous 90 days. If your payment is one of those, it may be recalled and you’ll have no choice but to return it to the trustee.

How can you protect yourself from this? If you’re factored and the invoice was approved by your factor, the preference claim would be levied against your factor and not you. The factor would suffer the loss and be required to present the defense. If you were paid according to the terms of the invoice and those terms are your usual and customary terms with the store, you’ll have an opportunity to demonstrate that to the court and you will ultimately recover those funds. But it will be incumbent upon you to demonstrate that this payment was made as an ‘Ordinary Course of Business’ transaction.

The best way to protect yourself from what seems like a slap in the face to the least responsible party is not to ship any stores that have poor payment histories, that are not approved by your factor for poor payment histories (if you’re factored), who don’t cooperate with the credit community in general, or who are poorly rated by a credit service such as D & B. Don’t think because you are friends with the buyer or the owner or the fashion director, that they can help you get paid early in the event the store runs into financial difficulty. Even if they can, those payments will most likely have to be returned long after you thought the entire episode was over and you escaped a credit loss. Another way of protecting yourself from a credit loss if you are concerned about the financial health of a store is to demand a pre-payment if that store wants your merchandise so badly. Pre-payments are not subject to recall by a trustee, since preference only applies to antecedent debt and pre-payments presume there is no antecedent debt.

I can’t tell you how many times I’ve heard clients tell me that they know the owners of certain stores so well, and they know that those people would never hurt them. Even if they have no intention of hurting you, they have no choice when it comes to bankruptcy and preference. So don’t fool yourself. You cannot elude the recall of payments made to you if they were paid earlier than another creditor was paid who shipped under the same terms of sale, or if they were not paid according to the usual and customary terms under which you shipped this same store and were paid by them previously. Don’t be naive. Don’t be led astray by promises. If you understand the Bankruptcy code relating to preference, you can avoid this totally unforseen nightmare from happening to you.

By Gary Wassner / President / Hildun Corporation / gary@hilldun.com / www.hilldun.com

If you have any further questions, please feel free to contact Gary via email.

IS FACTORING GOING OUT OF FASHION?

Provided for CFDA “From the Experts”

What is a Factoring Agreement?

Many designers enter into factoring agreements with financial institutions (which we will refer to in this Q and A as “factors”). In simple terms, a typical factoring agreement allows a designer to sell its accounts receivable to a factor that collects such receivables and remits them (minus a discount that the factor keeps) to the designer. Factors that regularly serve the fashion industry are usually quite able to make these collections, as such factors have an experienced network set up to deal with collecting from retailers both on your behalf and on behalf of other designers.

A factor also assumes the credit risk with respect to receivables that have been granted prior credit approval. Factors are able to do this because they have the ability to perform the sophisticated financial analysis necessary to determine the creditworthiness of the retailers you sell to.

Factors may also provide an advance on factored receivables. Such an advance provides many designers with the working capital necessary to pay for the manufacture of goods well in advance of the payment by its customers for such goods.

So far, so good. Is there any downside?

Unfortunately, yes.

First, everything comes at a price. The assumption of credit risk and the advance of receivables both take a bite out of the amount invoiced to your retailers in the form of a percentage fee.

Second, payments to you by the factor for collected receivables or as an advance on outstanding receivables are subject to the factor’s ability to make good on such obligations. The risk of the creditworthiness of a factor has historically been viewed as quite remote, but recent events involving CIT Group have certainly heightened the awareness of such risk.

What is happening with CIT?

CIT is the preeminent factor within the fashion industry. CIT received $3 billion of funding from certain of its bondholders allowing it to barely avert a bankruptcy filing in mid-July. Many analysts covering CIT believe that this financing will only serve to postpone a bankruptcy for weeks or a few months. In early August, CIT invested $1 billion of such funding in its factoring business. This would seem to indicate that CIT either expects such business to survive a restructuring intact or to be sold intact in event of liquidation.

What happens in bankruptcy?

In bankruptcy, a trustee is appointed to liquidate (in a typical Chapter 7 filing) or maintain and restructure the assets (in a typical Chapter 11 filing) of the bankrupt company for the benefit of that company’s creditors, both secured and unsecured. Once the company files for bankruptcy, it is protected under federal law from the claims of its creditors (this period of protection is known as the “automatic stay”).

What might a bankruptcy mean to designers for whom CIT factors receivables?

First, advances against future receivables might become unavailable as CIT determines its ability and willingness to advance cash. Since the automatic stay would be in effect, the designer would likely not be able to enforce their contractual rights to receive this advance.

Second, as designers are typically – under the terms of most factoring agreements –unsecured creditors of CIT, and secured creditors likely have a security interest in the cash accounts of CIT into which collected receivables are deposited, it is possible that such collected receivables will never be paid to the designer on behalf of which such receivables were factored.

Third, and perhaps worst of all, until the designer is entitled to terminate its factoring agreement with CIT (which termination is often only permitted during a short window that appears once a year), CIT will likely own all receivables generated by invoices issued even after it enters bankruptcy.

Are other factors subject to risk?

Recently it has been CIT, but it is certainly possible that the future may find other factors – particularly those affiliated with troubled financial institutions – faced with potential bankruptcy. In addition, certain factors (if so permitted by the factoring agreement with the designer), “re-factor” through CIT. So you may find that your factoring arrangement still exposes you to CIT risk, even though CIT is not a direct party to it.

What does the future hold and what should we do?

The fashion industry will likely continue to need factors as much as it needs sewing machines. They provide an essential service, especially for small and midsized designers. If CIT were to fail and not honor its obligations under its factoring agreements, the fallout could be devastating. But we would not expect such a failure to mean the end of the availability of factors, as factoring is often a valuable and profitable business.

In the end, the best case scenario for the industry is for CIT to pull out of their financial situation unscathed by avoiding bankruptcy and restructuring their business outside of court or for CIT to successfully sell their entire factoring business to a more financially healthy institution. However, as this might not be what the future has in store for CIT and the industry, designers factoring their receivables with CIT must not only monitor their exposure to CIT, but must also seriously evaluate available means to mitigate the risk of exposure to CIT.

As the factoring agreement governing a designer’s receivables, as well as the myriad of ancillary facts and circumstances surrounding that relationship, are different in each case, it is important for designers to consult with an attorney in order to evaluate all applicable risk mitigation strategies. Alternative arrangements to be considered include moving to a deferred purchase agreement with your existing factor or exploring the possibility or obtaining an insurance product for your receivables.

If you have any further questions, contact Hand Baldachin & Amburgey LLP at 212.956.9500 or via email at info@hballp.com.

* * *

This memorandum has been prepared by Hand Baldachin & Amburgey LLP (“HBA”) for general informational purposes only. It does not constitute legal advice, and is presented without any representation or warranty as to its accuracy, completeness or timeliness. Transmission or receipt of this information does not create an attorney-client relationship with HBA. Electronic mail or other communications with HBA cannot be guaranteed to be confidential and will not (without HBA agreement) create an attorney-client relationship with HBA. Parties seeking advice should consult with legal counsel familiar with their particular circumstances. The contents of these materials may constitute attorney advertising under the regulations of various jurisdictions.

IT’S NOT EASY BEING GREEN

Environmentally friendly fashion has captured the imagination of many of the most glamorous designers. But what most people know about the issue starts and stops with organic cotton.

Sourcing organic cotton is an excellent first step in “going green”; cotton is an incredibly pesticide-intensive crop, using twenty five percent of all the pesticides used in the U.S., more than twice the amount per acre as corn and four times that of soybeans! However, there is much more to know about the impact of the fashion industry and more you can do to reduce your environmental footprint.

The three heaviest impact areas of the fashion industry are: fiber growth, dyeing and printing chemicals, and consumer care of the items once they are brought home. Focus your attention in these three areas for the biggest bang for your time and effort. It is also important to know your sourcing mills, particularly those in the developing world; they are often poorly operated and have a heavy impact, even where environmentally preferred materials are used to make the goods.

FIBER SELECTION

Cotton:

1) Organic Exchange is the place for help in sourcing organic cotton. They work with brands and retailers to transition some or all of their cotton use to organic and provide a reliable tracing and verification system that ensures that the cotton you pay for is really organic. http://www.organicexchange.org/index.htm

2) If you want to move to organic cotton, start with a few items and gain experience about sourcing, production, quality, pricing, and marketing. Factor in at least a year in-advance of lead time to order the quantities you need from a reliable source.

3) Keep an eye open for future important developments in sustainable cotton; “BASIC” cotton in California and the Better Cotton Initiative abroad are promoting valuable improvements in conventional cotton farming that promise lower prices than organic but still substantially reduce the negative impacts of growing this crop. Sustainable cotton deserves your business once it is ready to roll.

Rayon:

Rayon is a popular natural fiber made from wood pulp. Although it starts from trees, however, conventional rayon is very heavily processed chemically, rendered into a pulp with dangerous chemical solvents and then spun into a fiber much like synthetic polyester. Thus, it is hardly “natural” and has a very heavy footprint. Tencel (Lyocell) uses an environmentally preferable manufacturing process with non-toxic solvents that are captured and recycled; it is also less energy-intensive than conventional rayon. Thus Tencil is a much better “green” choice for rayon (viscose) fiber.

Bamboo:

Bamboo took off several years ago an eco-fiber, emerging as a super natural fiber for both clothing and bedding. It grows pesticide-free and self-regenerates when cut down, a vast improvement over cotton. However, the manufacturing process for bamboo fiber is similar to that for conventional rayon and is incredibly chemical intensive. Avoid, if you’re looking to go greener.

Dyeing and Finishing :

There is nothing crazier than spending lots of money to source organic cotton and then processing the fabric without regard to deadly toxic dyes and finishes likely to be used to color it. Yet, this is often what happens, because there is so little understanding of the choices available at the design table for this aspect of textile manufacturing.

The solution to the dye problem is not to use “natural” dyes from organic sources such as plants. These natural products are actually not a good deal for the environment; they require large acres of land, often use extensive pesticides, and deliver low color yield per acre of agriculture. In addition, replication from batch to batch with natural dyes is a problem, which often leads to re-runs at the dye houses.

Instead, environmentally preferable dyes are those that have low environmentally toxicity, no toxic metals, degrade easily in the environment, and do not substantially reduce oxygen concentrations in the receiving water body.

Thus, ironically, the environmentally preferable dye choices are synthetic chemicals.

The worst: The chemicals most important to avoid are found on various Restricted Substances Lists (RSLs) developed by several associations here in the U.S. and abroad. See for example, the list by the American Apparel and Footwear Association list http://www.apparelandfootwear.org/Resources/RestrictedSubstances.asp for a list.

Better: Each major dye manufacturers offers lines of environmentally preferable dyes and treatment chemicals. Huntsman (formerly Ciba), for example, has its “Novacron FN” dyes and “Smart Prep” pretreatment chemicals such as “Gentle Power Bleach” that promise much reduced environmental impact. Dystar has its “Remazol Ultra RGB” dyes for cotton and other environmentally preferred lines as well. Specify that the mills dyeing your fabrics use specified dyes and avoid cheaper local substitutes that have not been scrutinized for environmental impact.

Best: Best in class for environmentally benign dyes can be found through Cradle-to-Cradle, which evaluates and certifies environmentally preferred dyes using very stringent criteria. http://www.c2ccertified.com/ . Similarly, a European firm named Blue Sign has developed a data base based on rigorous dye and chemical selection criteria that direct you to the most environmentally friendly chemicals for your fabric order. http://www.bluesign.com/

CONSUMER CARE

Growing fibers and dyeing/finishing fabric uses a lot of energy and natural resources, but it doesn’t stop there. Consumer care of clothing also takes its toll on the environment; in fact, machine washing, drying, and ironing have been found to account for more than half of a cotton T-shirt’s lifetime energy use! Traditional dry cleaning services also have a big bad environmental impact, using a highly toxic and persistent chlorinated solvent called perchloroethylene.

Note that most of the so-called “green” drycleaners are not really green; only liquid CO2 is a relatively safe alternative, but the technology is extremely costly and not practical for the average locally owned dry cleaner.

Designers can lower the footprint of the industry by opting for fabrics and clothing designs that can be washed in cold water, reducing the use of dryers and irons where possible, and by minimizing reliance on fabrics that need to be dry cleaned. A hang-tag on the fabric that urges customers to “think climate, wash in cold water” (a label currently used by Marks and Spencer) can help with consumer awareness of the issue.

SOURCING MILLS

NRDC is currently working with leading apparel retailers and brands in an initiative to identify best practices for textile mills operating abroad. Stay tuned for practical advice for reducing the footprint of your mills in the near future.

In the meantime, take the first necessary steps: find the time to identify the factories that dye and finish your fabric, and ask them to report their water and energy use per square meter of fabric. This will allow you to benchmark performance and identify best and worst in class for future business orders.

Linda E Greer, Ph.D. / Natural Resources Defense Council / lgreer@nrdc.org / www.nrdc.org

PROTECTING YOUR TRADEMARK: QUESTIONS & ANSWERS REGARDING YOUR MOST VALUABLE ASSET

A fashion design company’s brand – and therefore its trademark – is undoubtedly one of its most valuable assets. The trademark represents the identity of the company to its current and potential customers and distinguishes it from others. The trademark provides customers with clear indication of the products the company has designed and approved to be sold. The following is important information that you should know to protect your company’s trademark from unauthorized use:

What can be a trademark?

Any symbol, word or graphic that you use to identify your brand or company can be a trademark. This includes the name of your business, logo, slogan, symbol, sound, or even color schemes. However, your trademark may qualify for a United States or foreign registration only if it is not confusingly similar to a prior trademark use or registration, generic or merely descriptive of your good or service. The more unique the mark, the easier it will be to protect.

Why register a trademark?

Registering a trademark appropriately will permit your business to take advantage of U.S. federal and foreign trademark law to protect it from others attempting to tarnish or freeload on the goodwill and brand equity that you have worked to create. The owner of a registered mark has the exclusive right to use and protect it. When a mark is a U.S. federal registered mark, it becomes possible to rely on the United States Customs Service to restrict infringing items from being imported. In addition, registration of a trademark may provide you with a viable asset that can be used for financing purposes.

Beginning the trademark registration process can alert you if there is anyone who has been using or has registered a trademark which is the same as or similar to your mark. If there is such a senior user, they may have grounds for protesting your use of your trademark. It is important to be informed of any senior use of a trademark you want to use prior to investing time and money in using the mark for your business. Consult with an attorney to determine whether your trademark can be used or registered.

Where do trademarks need to be registered?

In the United States, the trademark is registered with the United States Patent and Trademark Office (USPTO). Generally speaking, a USPTO registration only provides protection within the United States. If your company is selling abroad (even a website selling to customers outside of the United States), a trademark registration in each country where you sell or manufacture may be advisable to protect yourself. It can be expensive to register your trademark everywhere and while the U.S. and other countries have harmonized their trademark laws, you should consult an attorney to determine the most appropriate steps to obtain international trademark protection.

What is involved in the registration process?

Trademark registration begins with a thorough search for relevant concurrent uses of the trademark you wish to use and marks that may be confusingly similar that may either prevent registration of your trademark or give rise to a later challenge of your trademark. Once you have been advised that your selected trademark is available, an application to register the trademark is filed. Once an examiner at the USPTO determines that the mark is sufficiently distinct in your particular category of good or service, the USPTO will publish the mark for opposition. If the published mark is not opposed during the thirty day opposition period, it will receive a “notice of allowance.” At that point, you must file proof of actual use in order for the registration to issue. Typically, the entire process takes about six to nine months.

How can strong trademark protection best be maintained?

Frequent and proper use of your trademark builds an association of your business with that brand in the public’s mind. By contrast, failure to use a trademark properly may jeopardize it. For example, using the mark generically in your marketing materials can result in a loss of trademark rights. Apply the ^TM, ^SM and ® symbols at the end of the mark so others know that you are claiming a right to the trademark. The registered trademark symbol, ®, may only be used once the mark receives a registration. The goods or services that contain the mark should maintain consistent quality. A strong trademark can be a powerful tool in establishing your brand and preventing others from profiting at your expense.

How long does the trademark protection last?

Ownership of a registered trademark may last forever so long as it is timely renewed after the first five years after the date of registration, and subsequently every tenth year. The mark must be continually in commercial use.

What are the possible courses of action to confront an infringer of a trademark?

If you believe that someone is importing or selling goods with unauthorized use of your mark or has a mark that is similar to yours, consult with an attorney. The attorney will evaluate your situation and determine the appropriate legal action.

I have something that I would like to trademark, how do I begin the process?

Good preparation prior to filing an application or investing in a trademark’s use is the best practice. It is recommended to begin the process by consulting with an attorney. Trademark matters can be complex and having an attorney as a guide will go a long way toward obtaining a strong, registered trademark for your brand in a cost-effective way.

If you have any further questions or are seeking legal advice, contact CFDA BSN Member Douglas Hand / Attorney / Hand Baldachin & Amburgey LLP / dhand@hballp.com / www.hballp.com

PRESERVE YOUR ARCHIVES

Proper preservation of past collections and archives require proper storage and handling. Here are some tips that can help guide you from BSN Partner, Garde Robe.

1) Location, location, location

The most important decision you’ll need to make is choosing an appropriate, safe and convenient locale to keep your collections. In the past, many designers chose to keep their entire archive on-site for accessibility purposes. Unfortunately, square footage costs on Seventh Avenue and around the city are making this option less viable. Plus, most office spaces and ateliers in Manhattan simply don’t provide adequate conditions for proper long-term maintenance of the garments. Therefore, off-site storage has become commonplace in recent years. Below please find a checklist of things to keep in mind when selecting a location for your archives.

2) Climate conditions

Avoid fluctuations in temperature and humidity at all costs. Variations in temperature and humidity can wreak havoc on fabrics and cause quick deterioration. Heat causes fibers to expand and cold temperatures forces contraction. This back and forth damages the fibers. Same deal with humidity; too much humidity causes mold and low humidity removes the fiber’s natural moisture. New York is terribly humid and hot in the summer and freezing in the winter. Do you know if your office’s air conditioning runs all night and on weekends? If it doesn’t, your archive is essentially being tortured. And in general, stuffy office closets and/or basement lockers are not suitable for long-term garment storage. Closets often have poor air circulation, and all fabrics need to breathe. Basements tend to have moisture/humidity, which can lead to mold and damage that is often irreversible.

Similarly, if you decide to keep garments in an off-site storage center, be sure to choose one that provides temperature and humidity control. Also, avoid keeping garments in storage rooms with “chicken wire” as a ceiling, because you never know what is being stored in the room next door. If your storage “neighbor” has perishables or bacteria-stained articles in their room, you are very likely to have a material-damaging insect infestation before long. Garde Robe has heard too many clothes moth nightmare stories to recount. Choose your location wisely!

Keep the temperature and humidity consistent; we recommend 70-75 degrees Fahrenheit, 45-55 degree humidity. If you choose to store on-site, invest in professional grade de-humidifiers and air purification systems, and maintain a temperature-controlled environment.

Proper lighting is also essential. Some bulbs can cause fading, and sunlight is an absolute no-no. Protective UV filters can be purchased, but your best bet is to limit exposure to light by turning off the lights and purchasing “blackout” shades. Also, please remember to designate enough space so that items are not squashed together which restricts ventilation and can cause permanent wrinkles.

3) Cleanliness is next to Godliness

Always make sure garments are properly cleaned prior to storing them for an extended period of time. Even if the garment looks clean, if it has been tried on or worn it may have invisible bacteria and or body oils that will damage and stain the fabric if left untreated for several months. I am not advocating dry cleaning garments just for the heck of it, but preparing garments for long-term storage absolutely requires a thorough cleaning. However, if you have a vintage or very delicate piece that may not be able to withstand cleaning, there are alternatives to dry cleaning. In essence, there is no “golden rule” when it comes to storing garments; each piece needs to be treated and handled accordingly. A preservation expert is your best resource for advice.

Additionally, you must always remove the dry cleaner’s clear plastic bags immediately as these bags emit gasses that can cause discoloration, attract dust and don’t allow the garment to breathe properly.

4) Cover Up

The plastic garment bags most boutiques use are not intended for storage; they trap moisture and don’t allow the garment to breath. For a day or week, those bags may suffice. But for long-term usage, you should purchase and use the proper storage supplies, preferably made from archival-safe materials.

Muslin and canvas garment bags are great for hanging items because they allow the garments to “breathe” and provide protection from the elements. Inert archival boxes are your best bet for folded items. Almost all garments need to be wrapped in or stuffed with acid-free tissue. Again, there is no formula; you will need to consider the best way to care for each piece individually.

5) Folding vs. Hanging

Another important decision to make is whether a garment should be stored on a hanger and placed in a breathable garment bag or folded with tissue and placed in an acid-free archival box. In general, knits, stretchable, delicate, sheer and heavily beaded items need to be folded. Always use acid-free tissue in the creases to avoid permanent creasing and damage to the garment’s fibers.

Don’t forget that choosing the proper hanger is critical. There are literally hundreds of shapes and sizes to choose from. It is unlikely you will be able to utilize only one type of hanger for your entire collection, so always keep a wide variety of hangers on hand including traditional, padded, extra-wide, suit hangers, etc. Take advantage of a garment’s support straps or loops to avoid stretching. You should never use wire hangers.

6) Damage control

Garde Robe recommends using cedar and lavender sachets as a deterrent to material damaging insects. However, always be extra careful that these products do not come in direct contact with the garments as they contain oils that can cause permanent stain. Moth traps are also effective as they attract and kill the adult moths, which prevent them from laying the larvae that actually chomp the clothes.

In conclusion, choose a clean, dry and well-ventilated location, always use the proper supplies and take necessary precautions. Following these simple steps will significantly extend the “life” of your collections.

Douglas Greenberg / Vice President / Garde Robe Online, LLC./

doug@garderobeonline.com/ www.garderobeonline.com

LICENSING 101

You have a brand. You have a profitable brand. You have a profitable brand with a substantial following. You want to extend your brand into other product categories. How do you go about this?

Well if you have endless amounts of capital, then you can start a new division of your company and begin development, manufacturing, marketing, and sales of the new product category. Alas, many companies do not have the resources or the know-how to break ground in this exciting new territory. Do you know how to create a mold for sunglasses? Or an innovative last for footwear?

Licensing has become an important, powerful, and effective marketing vehicle for an increasing number of companies. How? Through licensing, companies are able to extend beyond their core competency into new product categories, generating additional revenue streams, expanding consumer awareness (vis a vis the new products), and reinforcing brand image.

On the flip side, manufacturers are investing in licensing well known marks because using an established brand name on a new category of goods creates an instantly desirable product. If the manufacturer were to launch a generic, in house brand it would take lots of time and money to establish the goodwill that the established brand has already earned. Additionally, consumers are willing to pay a premium for a branded product rather than generic or un-branded product.

Where to Start:

• Review the primary objectives of your brand
• Review consumer demographics
• Analyze brand assets including logos, graphics and others which may be utilized on licensed products
• Evaluate market conditions and opportunities in categories deemed appropriate for licensing
• Collect, review and evaluate materials and data regarding the brand’s identity, image, positioning and popularity. This material may be used to “pitch” the brand to prospective licensees
• Identify potential licensees in selected product categories and pitch pitch pitch!
• Review specific licensee proposals and marketing plans
• Negotiate license agreements with prospective licensees

It doesn’t stop there; once you have a fully executed license agreement you will, for starters:

• Begin product development with the licensee
• Continue to build, securing licensees in a strategic manner
• Work with retailers to establish strong presence in the marketplace and support licensees
• Make sure licensees attend key trade shows
• Monitor the marketplace for infringing products and coordinate anti-counterfeiting efforts
• And last but not least, earn licensing revenues

Susan Chung / Licensing Consultant / susanchungnyc@earthlink.net

MANAGING RISK: TODAY’S UNPRECEDENTED RETAIL CLIMATE

How do you know which stores to ship when there are so many unknown factors in this economic climate?

I’ve heard so many answers to this question over the years. Some of the best are ‘the store is beautiful’ or ‘they’ve just opened another amazing looking store. It must have cost a fortune. They have to have plenty of money’. Needless to say, those are exactly not reasons to ship a store. The more money spent on furniture and fixtures and on leases, the less money they have to pay you. There’s a middle ground, of course, but I’ve heard this too many times not to mention it.

So how do you know which stores to ship?

Everyone today should at least have a credit agency checking their orders. However, one thing to keep in mind with a credit agency is that they take no risk. They offer opinions only. A factor or credit insurer does not approve an account for shipment without assuming the risk. So they have much more at stake in the decision making process.

The fact that a store paid you well last season may not be a reason to ship them this season if they are being declined by your factor or given negative ratings by your credit agency. Financial conditions are changing rapidly.

Though I hate to say this, don’t listen to your sales department when it comes to evaluating a stores credit. The two departments do not and should not mix. It’s like combining an advertising sales department with an editor’s news room. There is an inherent conflict between sales people and credit people, and you need to recognize and respect that. Sales people have one agenda and credit people have another. Both are invaluable, but both are thoroughly different.

If a store is cooperative, willing to provide financial information, willing to work with you on your terms, then they are worth considering. If they stone wall you on information, they usually have something to hide. If they are being declined for credit in the market and they refuse to discuss credit card payments or COD terms, then you should simply ask them point blank, “Why should I take the credit risk and ship you?” Likely, they won’t have a good answer.

Be very careful with COD terms. COD checks dated 30 days hence, are no different than net 30 day terms. Don’t fool yourself. If a store is declined for credit for negative reasons, ship certified COD or credit card. Negative declines refer to stores who have previously been placed for collection, whose financials are weak, who are showing significant losses on their statements, who are past due in the market. Often stores are declined for lack of current information. Request it from them. You must have a basis for determining whether they are credit worthy or not, and as I said in the beginning, what a store looks like is not one of them.

I’m not getting paid. What are my options?

Well, if you’re not factored and the invoice is at your risk, your options are unfortunately few. We all know that the court system takes time. Your best bet is to get the owner on the phone and work something out, regardless of how frustrating that might seem. Start a dialogue. Take back what you can, offer a discount if you must, but get the invoice settled. Don’t ship new merchandise as a lure to get the old invoices paid. You’re not making any headway at all. The old adage, throwing good money after bad, rings true more often than not. If you’re factored and your factor has other vendors owed money by the same store, the factor has leverage that you don’t have. Regardless, the longer it sits unpaid, the less valuable the merchandise becomes to both you and the store. If you can’t speak with anyone, if the voicemail box is full, if no one answers the phone during business hours, it may be too late. Then a collection agency is the best and last recourse and should be assigned the claim asap.

If a designer doesn’t work with a factor, how would one be helpful?

Factors today are almost a necessity. No one individual has the ability to evaluate credit in these tumultuous markets. You need a team, a trained credit department to assist you. Also, you need the guarantees, the approvals, which insure your invoices. Even the largest of stores today are subject to credit restrictions and limitations, as we all well know. Factors that cater to small companies are available to assist with these decisions daily. Even if they decline the account, they will still be able to provide you with invaluable information regarding how they are paying other clients, what terms they’re accepting, how much merchandise they are returning unauthorized, how they are responding to collection calls, and so much more. They also have daily and direct experience dealing with the stores you want to ship. If they are paying one designer well and five others poorly, and you happen to speak to the one who is being paid well, you’re not getting a clear picture of their credit worthiness or ability to pay you. Stores tend to pay the lines that are performing best and that they need the most, when their cash poor and unable to pay everyone on time. So you need a balanced opinion. Factors collect the funds and correspond daily with the stores. It’s much easier for them to advise on credit and assist with collections. If you were a store who depended upon one factor’s credit lines for 20 of your best vendors, whom would you pay first? That factor or an independent designer who isn’t factored by them? If they pay the factor late, they risk not getting shipped new merchandise by 20 vendors, not just one.

What insight or advice can you share about navigating this economy?

Every day is a challenge in this market. Talk to others in the business. More importantly, listen to what they have to say! If they tell you a store is unreasonable or demanding markdowns or chargeback’s that are unauthorized, take those comments seriously. Don’t sign purchase order agreements that require a guaranty of sales percentages. Don’t agree to markdowns that are unauthorized. Turn the next order down if the current invoices are not being paid in a way that allows you to make money on the work you’ve already done. Be persuasive. Be honest. If your product sells out, do you ask the store to pay you more for it? Of course not. But if it doesn’t sell well, whose fault is it? Not yours, if you delivered according to order and sample. So why should you share the blame? Don’t allow any one store to become more than 20% of your season’s business. No matter how strong the store may seem today, it may not be tomorrow. And besides the credit risk, if you are so dependent upon one store, you become a potential victim of your buyer. If one store returns one invoice that represents 3% of your total sales, you can absorb that return. If one store returns 20% of your season, you may not be able to absorb that loss. Spread the risks today or at least sell larger amounts to approved accounts that you’ve had past experience with and in whose stores your product has a history of performing. Do not force product on your stores. Tell your sales people or sales reps to sell your strongest products, the styles you know are the least risky today.

Gary Wassner / President / Hildun Corporate / gary@hilldun.com / www.hilldun.com

DOS AND DON’TS: WEBSITE 101

In a world where websites and blogs have not only become a business necessity, but a daily obsession, it might seem that any website will do as long as you have one. This is the equivalent of assuming that dial up is just as useful as high speed internet. Web design expert and BSN Member Jessica Lim of Sprout Creative Group offers her list of website Do’s and Don’ts. If you spend as much time browsing online as Sprout Creative Group, some of the tips will resonate with you.

1. DON’T create a blog unless you have something interesting to say – this usually means focusing on a specific topic.

2. DO have a website that reflects current products, press, and services

3. DON’T let your web content get stagnant- it will begin to look…stagnant

4. DO have a strong relationship with your internal web team or external web partner

5. DON’T hire your friend’s younger brother’s best friend from high school

6. DO get ahead by creating unique site content beyond the expected ‘seasonal updates’

7. DO offer e-commerce

8. DON’T get left behind. Stay in tune with industry trends by attending insider conferences. I recommend: http://events.carsonified.com

9. DO find your next CTO by networking at the above mentioned conference

10. DON’T pay too much attention to advice from “luxury experts on technology”- advice should come from people who breathe web (see #8)

11. DO get ‘sticky’. Figure out a way to engage with your visitors and keep them coming back. Go beyond pretty photos and esoteric words or industry lingo

12. DO have content that is tailored to the web

13. DON’T sign-up for a proprietary ‘in-house CMS system’ that locks you in for the next 3 years (you just may be funding their software project)

14. DO offer web only promotions (not just an extension of an in-store event or sample sale)

15. DON’T force your site visitors to sit through endless loading, or loading with every click. They hate waiting!

16. DO have a clean layout that gives users what they want

17. DON’T go so crazy with Flash, the wet floor/reflection effect, or navigation that is more mysterious than simply easy-to-use. It gets old, fast.

18. DO enable “search” on your site- let customers find that shirt they saw last week in a magazine

19. DON’T underestimate how SEO and Search Marketing can change your online game

20. DO check out the Sprout Creative Group’s blog “Sprouting Edge” www.sproutingedge.com which offers advice on web and style

Jessica Lim / CEO / Sprout Creative Group / jessica@sproutcreativegroup.com / www.sproutcreativegroup.com

LIVE FROM D&A: TRENDS FROM OUR FAVORITE TRADE SHOW

Here is the latest show report on the trends that stood out during our recent NY Designers & Agents Fall 2009 show. I can say that the overall feeling was one of realistic optimism, not quite the blind faith of the past but surprisingly enthusiastic. Given the current economic culture both designers and retailers have sharpened their pencils. Designers brought a fresh yet refined approach, which was matched by ready, willing, and highly focused retailers. Both sides needed the positive forum that Designers & Agents created to stand eye to eye and move forward. The electricity brought by this tuned in frequency created a positive buzz throughout the three day show. In the end the experience exceeded everyone’s expectations. Orders were written and placed, with many retailers filling in summer deliveries, which was definitely a good sign.

TRENDS: Yes, it was a big accessory season! This is always the case when one desires a big bang for their buck. Accessories appear to be the least guilt ridden category these days.

• Jewelry sparkled, it ran the gamut from precious metals with dainty semi precious stones to bold and multi layered bling bling.

• Gloves, both short and long made a strong appearance as a fashion item, some with openings to allow for blackberry texting

• Handbags were soft and supple, fringed, oversized to small, lots of shoulder length straps, and there were colors across the spectrum.

• Strappy platform sandals wrapped the ankles. Boots were everywhere from ankle height to over the knee. Belts, also strong right now, both were both wide and slim worn high, low and doubled.

• Scarves continue to be strong with woven elements of print and texture.

• Fall neutrals were shown in strength, in particular gray and black, but also included were shots of vivid color. Dresses were evident; shapes were sophisticated, there was an abundance of sheer and silk fabrics. Shine and sequined materials were frequently seen.

• There were lots of layers and lengths to pile on. Shorter jackets over tunics over slim pants. Blouses were often sheer and provided another layering opportunity.

Strong independent items were important, including novelty sweaters and beautiful tops. Loads of soft touch knits taking over from the basic T shirts of the past. Leather looked fresh in the form of skinny pants, strong jackets, and separates. Jackets with a military feel looked new, so did plaids, and wool with velvet and embroidery detailing. Within the collections buyers were not always after the total looks per se, but individual signature pieces that could stand on their own and be merchandised easily. The “investment” piece still had some legs for those who could spend on an item that looks fresh and gives an edge, yet is classic enough to have longevity. Sustainable brands continue to build momentum with larger offerings within each collection. Buyers are seeking out designers and brands that are selective in both their design integrity as well as distribution choices, steering away from those who sell to department stores and shops that play with early markdowns.

Each season Designers & Agents present a press breakfast at which a merchandised selection of looks from participating designers is featured. This season a guest stylist was invited to put their spin on the presentation. Lynn Yaeger, iconic fashion columnist took up the challenge and turned her distinctive style towards creating an inspired mix of fashion looks, highlighted by a host of accessories and her quick wit. Lynn, we want to thank you for sharing your keen eye and wonderful spirit with us at D & A.

Barbara Kramer / Co-founder / Designers&Agents / bk@designersandagents.com / www.designersandagents.com