Narasin: That's probably the thing Laurence would nail me on the most. He'd say we're wasting a lot of money on advertising and public relations instead of putting the cash back into the business. We're much more geared to promotion and marketing than we are toward advertising. We probably spend around 2% on promotion.
Levy: We probably spend .01%. We spent $5,000 on a little brochure.
Narasin: Maybe this year we're spending $100,000 on advertising and PR, which is a very small amount toward buying that brand recognition. The advertising we do is purely awareness. Retailers like to have awareness built. They like to see some reinforcement. We gear our campaigns around two ideas. One, we make fun clothes, and two, we make American clothes. That's the look I want to own.
Levy: I think fewer and fewer people are buying because of the image. I think price is the Almighty.
Narasin: I don't think we differ on the fact that price points are coming down, and you've got to sell it at a better price. I just want to sell my product at a better price with my name instead of somebody else's on it.
Levy: I would really now say to Ben that if he's looking for the long-term play, he's wrong. The retailers are shrinking. They are taking fewer and fewer brands.
Narasin: Does that mean there's no place in the market for viable brands that have a good market niche? No. There will always be a place. Consumers like something they recognize.
Levy: I know both sides of the coin. My father, a wonderful man, was a branded women's coat manufacturer. Paul Levy. He's just been put into Chapter 7. About three years ago he would say to me: "Paul Levy. I've been in Lord & Taylor. I've been there every year. I've done what they've wanted me to do. I'll always have my brand." He would say to me, "I know you guys are building in a different way." I got from him pretty much the same argument that Ben gives.
And I saw my father go bust because May Co., his biggest corporate client, simply said, We're trimming our list. We don't want that many brands on our shelf. Our customers are confused. They'd rather have us give them a better price on a brand they know.
I just don't think there is a long-term play for being a brand, unless you're very lucky and unless you have a lot of money behind you and really can go in and spend a lot to build the name. I think the long-term play is to follow the trends in the marketplace.
Narasin: There's a lot of research on both sides of the table about whether brands are going up or going down. There are a lot of stores that are trimming. Look at Macy's. It went hog-wild on its private label. What happened to Macy's? It went into Chapter 11. When Macy's came out of it, one of the company's big focuses was, let's get brands on the floor that the consumers can understand, that they trust.
Levy: Another reality in the marketplace and why I think it's tough for brands: small mom-and-pops are going out of business at a rapid rate. If you get the credit reports, you always see two or three customers who you've previously sold to going Chapter 11. You said this to me, Ben: "Every year I have a new set of stores I'm selling to." They used to be your stable base. There's one resort town in Georgia where all the small menswear stores have no credit. Can't ship them anything. The volume discounters and outlet stores have eaten into them.
Narasin: You also have to remember, though, the things that are most valuable to the price discounters are brands. You can make millions of shirts for x, y, and z because they need a basic commodity, price-pointed thing, but they are always looking for a brand to put in. But Laurence is right. If you want fast growth, he is 100% right. The way to go is private label. If all I wanted to do is make money and do it fast, I would not do a thing in brands, and I would turn out the private labels for everybody I could lay my hands on. But I don't want in 10 years to end up being the guy that's still hustling. That is not a personal interest of mine.
Levy: That is completely, completely wrong. You say it's a personal thing. It's not a personal thing. From a practical business standpoint, you are 100% wrong. There is no long-term growth in having a peripheral brand right now.
Narasin: It is a personal goal of mine to develop a company that is functional on its own. A brand that is functional on its own.
Levy: I agree that you want to develop that, but I'm telling you I don't think it can be done. Growth means only one thing to us. Bottom-line business: net profits. That's the way we want to look at business. That's the way Wall Street wants to look at a company. That's the way businesspeople want to look at a company. And that is continued, successful-over-a-long-period-of-time growth, hitting the next levels, hitting new plateaus, taking things from the logical next steps, and going from being a small manufacturer to being a midsize manufacturer to becoming a public corporation to adding different divisions.
Narasin: But you have nothing tangible. What you're basically growing on is you and Jeff. If you don't own your factories and you own a bunch of machines and you're out there hustling and selling, that is what your business is. That's all you have to sell: your own hustling. That's it. End of story.
Levy: But you have only an image to sell.
Narasin: Until I get to the point where the brand becomes its own thing --
Levy: But that's not the reality of the market. You don't get to that point.
Narasin: I would agree that it is more difficult. There's no debating that. But I think in the long term it's more profitable and more valuable. The longevity of your company, though, is firmly dependent on two people.
Levy: You're as tied to the mast as we are. You're the designer. You're the president. You're the salesman. You are everything, Ben.
