VOLUME 56, NUMBER 25 June 16-22, 2000
Ready Teddi
The American Apparel Group may be one of the better-kept secrets in California's garment industry. Granted, the manufacturer that produces the moderate missy line Teddi is somewhat off the beaten path, headquartered in Rancho Dominguez, Calif. for the past five years. The company purposely kept a low profile as it blossomed from a $20 million (annual sales) polyester blouse resource to around $180 million manufacturing missy casual sportswear. Throughout the growth, the company stayed true to its older misses customer. Teddi also retained its moderate price point by quietly shifting all its production overseas. But now the company is beginning to change its direction. To maintain its position in department stores, Teddi has expanded its product offering to include both traditional and updated merchandise - while still targeting an older customer. Teddi is also updating its image in the eyes of the industry. The company has launched a very focused branding campaign targeting upper-level executives with an eye to changing the perception of Teddi.
California Apparel News senior reporter Alison A. Nieder recently met with Stuart Weiser, chief executive officer of Teddi, to find out what prompted the company's new strategy.
How did Teddi get to be where it is today?
It's been in business about 45 years. It started as a domestic, traditional, polyester blouse company by Teddi and Sam Winograd. They ran it very successfully for many years, selling mostly the mom-and-pop stores. Steve Meadow bought the company 20-some-odd years ago. [By 1986] Teddi and Sam were in their 70s, ready to retire, doing about $18 million a year. Their largest department store was Rogers in El Monte. Teddi and Sam were very happy with an $18 to $20 million business. They decided they didn't want anything but high margins, minimal load and not to deal with any markdowns. I came here 14 years ago as CEO and president. We were based in Gardena at the time. I interviewed everybody in the company [and] I fired about 90 percent of the company. I maintained 10 percent of our staff of 200 and some-odd people. We built an infrastructure, started a new merchandising team, new MIS department, new product development.
What were the biggest challenges you faced at that point?
Teddi had an identity crisis. It appealed to a 65-year-old grandma. The demographic was 65 and older. When somebody hit the obituary column, we lost market share. The major stores perceived Teddi as just an old lady, pull-on, polyester pant line. We also had tons of inventory and tons of product that were aged - about $900,000 dollars worth of goods. We sold that off… profitably. We tried to find an area where we could market our product and we discovered a product from Burlington Klopman Fabrics called Le Chute. That particular product was popular in the mom-and-pop arena. It was a polyester product like a parachute cloth. I bought 5,000 yards, designed a couple of items, put it into the stores. It was very successful. I managed through my connections to get that into the major department stores. Four or five years after that, we were running 4 to 5 million yards a year. That launched us into the major department stores.
Who is the Teddi consumer today?
We still hang on to the 65-year-old. But if you look at the numbers, every 40 seconds, there's someone turning 50. The thing that we realized a little before our competitors [did] is that the woman who turned 50 in the year 2000 didn't wake up and say "I'm 50 today, I want to dress like grandma." Without throwing the baby and the bathwater out at the same time, we maintained some of the product that's very traditional and very true to that older woman. The balance of our product [is] much more ageless. We have a crossover product. She could be 45 and she won't buy at Century City and she certainly is not going to buy it in Beverly Hills. But if you go to May Co. in Indio or Riverside County, a 40-year-old is buying my camp shirt in a Hawaiian tropical print. We're very timely, I don't want to say trendy. We're very focused on what's going on in the market. We just make it appropriate for that traditional, Middle America customer. Everything we do is machine washable. There's no dry cleaner within miles in half the towns we sell.
Who are your major retail customers?
Today Teddi represents about 25 percent of May Co.'s traditional coordinate business. It's 55 percent of JCPenny's labeled casual. It's 22 percent of [JCPenny's] traditional coordinate business. We probably sell every major department store in the United States except Dillard's because of the penetration we have in JCPenny. We're in the moderate tier. We have a Sears business. We have a large Kohl's business, about $25 million dollars.
What is your branding strategy?
Fourteen years ago, I don't think there was any branding. We've done several surveys and spent about $100,000 because we didn't know what kind of brand equity we had. We have signage in every May Co. store. There's an ad in the paper in almost every city [where we sell] every single day, but we live in this little cocoon here and I don't know what someone in Mississippi is thinking about my product. We did a survey [and] we were surprised within the demographics how important the Teddi label was. They used to compare us to various labels [such as] Donnkenny, Koret [and Alfred] Dunner. These are the people we hang with in a lot of locations. In the last six months, the label they compared us with is Liz Claiborne - only because our product is getting younger. It doesn't have the same recognition [as Liz Claiborne] because I don't spend $20 million a month in advertising.
What will you do to support the new identity?
We hired a public relations firm. We hired an advertising agency: The Miller Group. We had the idea of [a retail executive] sitting in an ivory tower who doesn't shop the line anymore but has this notion that Teddi makes old lady clothes. We want to change that notion. We did some teasers, direct mail, very tasty promotions to presidents, CEOs and general merchandise managers. We went to Forbes. Three hundred executives will get a year's subscription to Forbes. They put up a mock front, so when the president or CEO of Sears picks up Forbes, Teddi is on the front cover. You turn the page and it says, "As seen in Cosmo… Cosmo, W. Va., Thursday, 3:30 p.m." Then on the back [it reads], "As seen in Harpers… Harpers, Va." They will get this at the end of June. About three weeks later they'll get an atlas in a very fine wooden box, the front cover will say Teddi on it. At the very center of the atlas is a map of the United States with a flag of Teddi in every city. Three weeks after that, the same CEO, the same president [will receive] another fine wooden box [containing] binoculars and it says, "Look at Teddi, it's everywhere." That's one of the promotions. We also changed the label. As the product evolved, we looked at this label that had been around for 45 years [and] it looked like an old lady's label. We changed some of the graphics, we changed our stationery, we changed the hangtags, the whole bit.
What prompted these changes now?
Making the trade aware of the changes is something that we needed to do. The business is very cyclical. Update is something that they talk about every two or three years and then traditional becomes a dead word. When we started the process of calling PR people, we were just getting out of a traditional cycle. All of management was saying we've got to go younger, we've got to go hipper, we've got to go cropped pants and clam diggers, we've got to go sleeveless. We were making that but [retailers] would never think of Teddi doing it. We just made them aware that we did it before they dropped the resource. In the meantime, updated started to drop down at retail [and] traditional is absolutely back. Retail is such a knee-jerk reaction, they don't see anything in moderation. They feel that shorts are going to be good because last year they didn't have enough of them, so they overbuy 50 percent more shorts. [Now] update is getting killed. [You don't want to bring] in more sizzle than… steak. You learn from sizzle. [If] you don't build in obsolescence, you're dead. We look at every order and make sure to put sizzle in because it builds in obsolescence. But if the sizzle is more than 5 or 10 percent of the order I'm not going to growth-margin-out my business.
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