In a world of cheap apparel manufacturing, Steven Borsook is an outlier.
His knitwear company, which produces Parkhurst sweaters, gloves and berets, is a rare example of a clothing supplier that still makes most of its garments in Canada rather than in low-cost – and sometimes deadly – factories in low-wage countries overseas.
His decision to cling to Canadian factories has come at a price. His company’s annual sales have dropped to roughly $20-million today from $30-million over the past decade. To help make up for higher hourly wages and falling revenues, it has cut its staff in half to about 150 and bought new machinery to do more of the work.
It has also shifted about 25 per cent of production to China – items that are too expensive to produce here, such as hand-made embroidered apparel.
Mr. Borsook estimates that if he shifted all of it overseas, he could boost profit by at least 30 per cent. But in the aftermath of the collapse of a building that housed garment factories in Bangladesh, leaving 1,127 dead, the made-in-Canada label may prove to be more appealing to consumers than before.
“There are not many of us left – we are the real diehards,” Mr. Borsook, president of Dorothea Knitting Mills Ltd., said as he toured one of his airy factories in an industrial enclave of midtown Toronto.
“There’s a definite sense of satisfaction and pride when you can make things here.”
The horrific events in Bangladesh have given apparel retailers a jolt, prompting some major players to pledge to work for changes. Loblaw Cos. Ltd., whose Joe Fresh clothing line was made in the building, moved swiftly to offer compensation to victims and develop a new building standard for any plant producing one of its private labels, including its apparel line. Loblaw and others, such as Sweden’s H&M Hennes & Mauritz AB and Britain’s Primark Stores Ltd.(which, like Loblaw, is controlled by the Weston family) have agreed to sign a global fire and building safety accord. Those initiatives, of course, will likely add costs.
The evolving situation at overseas garment factories is being closely watched by the shrinking number apparel makers in Canada. The industry is a fraction of its former size: Revenues at Canadian clothing manufacturers declined to $2.5-billion in 2010 from $7.8-billion in 2001, according to Statistics Canada. The number of employees in the sector fell to 25,670 from 106,226 in that span.
Yet some people foresee a modest reversal in that trend. Some producers already are focusing more on domestic production, not for patriotic or moral reasons but because it makes business sense.
“People are coming back to produce here to be closer to the market,” said Elliot Lifson, vice-chairman of Peerless Clothing Inc., which makes about 20 per cent of its men’s suits in its factory in Montreal, down from 100 per cent a decade ago. “The most important thing in retail is quick turnover of inventory.”
Peerless takes up to eight weeks to get a suit produced in China – where labour rates are rising – and shipped to a North American retailer, compared with about one-third that time from its Montreal factory, said Mr. Lifson, who is also president of the Canadian Apparel Federation.
A few retailers are starting to step up their embrace of Made in Canada. Hudson’s Bay Co., whose Olympic Games athletes’ garments are produced in Canada at suppliers such as Parkhurst, is looking to expand domestic production for its HBC signature stripe collection, executive vice-president Mary Turner said in an e-mail.
“There is no question that quality and speed to market are two very compelling reasons to work with North American vendors, and why we value partners like Parkhurst,” she said. Over all, HBC mostly sources its clothes from overseas because there are fewer Canadian options, she added.
Boutique Tristan & Iseut Inc., a clothier that makes as much as 30 per cent of its inventory at two Quebec plants, last week underscored the rising heat retailers are feeling to source domestically by mounting a digital sign in its store window at Toronto’s Yorkdale Shopping Centre. Its message: We don’t have clothes made in Bangladesh but we do have plenty made in Canada. (It removed the sign after two days, following complaints from two shoppers that it was taking advantage of a tragic situation, said president Gilles Fortin, adding he was simply trying to keep alive the issue of poor Bangladesh working conditions.)
With the Bangladesh and other overseas manufacturing disasters fresh on his mind, Mr. Borsook wonders whether this will be a turning point for retailers to curb their imports. A member of the third generation of his family to run the business, he now supplies Parkhurst and private-label products to independent clothing stores, as well as HBC, Quebec-based Simons, and U.S. chains Nordstrom and Dillard’s. He even outfits the Canadian army with berets and sweaters.
He specializes in higher-end knitwear – his is one of the few shops that dye the products here – and retailers such as HBC and American Apparel appreciate that he can ship merchandise to them as quickly as 10 days or less.
Mr. Borsook said another compelling reason to stay domestic is that overseas factories usually require bulk orders of at least 800 or 1,000 products, which can result in retailers ordering too much and clearing out excess inventory at reduced prices – and profits.
Still, the Parkhurst economic model can be challenging. In the next year or two, Mr. Borsook is looking to consolidate his domestic production to one of his two factories and close the other one.
His hourly labour costs are more than 50 times steeper than those in Bangladesh. His lowest-paid employees earn at least $10.75 an hour, slightly above Ontario’s minimum wage of $10.25; higher-paid ones get up to $15. When other benefits and pensions costs are added in, the wages are as much as $20. That compares with 24 cents an hour in Bangladesh and closer to $1.26 in China.
Mr. Borsook has moved to offset this by buying dozens of $100,000 sweater machines, $50,000 hat machines and $25,000 glove machines. The latter churns out a glove in three minutes; a worker then spends 15 seconds hemming the cuff on a blind-stitch machine.