Rick Helfenbein is president and CEO of the American Apparel & Footwear Association (AAFA), the national trade association representing more than 1,000 brands in the apparel, footwear, and accessories industry. Rick became president and CEO in February of 2016 and leads the association and its operations. Rick has more than 40 years of experience in the apparel, footwear, and accessories industry, and has been credited as being one of the creators of the original Le Tigre brand plus helping to engineer the split between Izod and Lacoste. He also introduced Burlington Industries to the apparel market and has extensive experience with manufacturing in the USA, Asia, and Latin America both from an apparel and textile perspective. Rick holds a Bachelor of Science in Economics from the Wharton Business School. He participates in the Consortium for Operational Excellence in Retailing at Wharton and Harvard.
Today we have the privilege of talking to Rick Helfenbein, to learn more about the role of his organization and the intersection of retail and policy. His insights on the increasing need for retailer and brand engagement in the political process shouldn't be missed.
StyleSage: So for those who may be less aware of what goes on behind the scenes in retail, tell them a bit more about the mission and vision of the AAFA, and why it’s so important.
Rick: To put it simply - AAFA is where fashion and politics intersect.
We are the trusted public policy and political voice of the apparel and footwear industry. On behalf of more than 1,000 brands, our office ensures that decision makers – on Capitol Hill, in the Administration, and around the world – understand the concerns and contributions of our great industry, which includes nearly four million U.S. workers and about $384 billion in annual U.S. retail sales. Our organization guides our members on issues that impact them from trade policy and supply chain management, to brand protection.
This past year has been unprecedented, as it relates to the political processes in Washington, D.C., with intense interaction between the private sector and government.
As we move forward, it is critically important that companies across the industry engage in the political process. In 2017 we achieved some big wins for the industry along various stages of the supply chain, and we were able to add the travel goods category to the Generalized System of Preferences (GSP) program, which is now saving millions on duty costs that can be re-purposed towards well-paying jobs for U.S. workers, lower costs for consumers, and increased investments in product innovation.
StyleSage: Certainly one of the biggest topics of 2017 was our participation in trade agreements as well as the Border-Adjusted Tax. Can you talk us through, in a broad sense, the role that the AAFA would play when these types of agreements or legislation come to the table? What are the potential implications to American brands, retailers, and the consumer public, of us withdrawing from TPP and potentially NAFTA?
Rick: Apparel and footwear companies are one of the most taxed business enterprises in America. In addition to the corporate tax, our group also pays $15.5 billion to the U.S. government via tariffs on imported products. This accounts for 51% of all duties collected by the government while our products only account for 6% of all imports to the USA. Because we are in this untenable position, trade agreements and preference programs are essential tools that are utilized to reduce the burden.
Last year, the Border Adjustment Tax (BAT) was introduced as part of tax reform proposals and it immediately created a huge concern for our industry. This provision would have removed the ability to deduct the Costs of Goods Sold on products imported to America, resulting in a major increase in our tax burden. The result would have been price hikes of more than 30% for consumers or could have forced companies to shut down. When BAT was introduced in July 2016, it immediately became AAFA’s mission to broaden awareness of the proposal and communicate concerns to policy makers in Washington. To do this, we spoke with legislators, conducted a communications campaign with national media, and partnered with ally organizations to sound the alarm bells. Fortunately, the provision was removed from the tax reform debate in July of 2017. Effectively, we killed the dreaded BAT.
Today’s most pressing issue for our members is America’s potential withdrawal from NAFTA, which would badly disrupt supply chains and result in increased prices.
Our job at AAFA is to anticipate the key problems, report them diligently to our members, and then advocate for pathways that lead to solutions. These days, for sure, there is no shortage of industry issues to keep us busy.
StyleSage: As we kick off 2018, what are the top-of-mind issues and challenges for retailers and brands? There’s obviously a lot of opinions about the state of retail - considering all the headlines from last year. From your point of view, what’s happening in retail? Is it good, bad, or a necessary mixture of both?
Rick: The challenge for 2018 is to enhance and capitalize on retail strengths that were unveiled in 2017. While brick & mortar was being tortured by Wall Street pundits, it became increasingly apparent that some retailers were “catching on” to the methodology of how the “new” millennial shopper thinks. It’s now abundantly clear that 2018 will morph cyber and brick & mortar. Retailers have now realized that the delivery system has changed and thus, the supply chain.
Overall retail sales will likely be excellent in 2018, following on the overall holiday gain of 4.9% in 2017 wherein apparel and accessories contributed 2.7% of that gain. For most of the last two years, retailers have been going through a period of adjustment, as they shed capacity and become more efficient. At some point, we will cross the line and earnings will increase for more and more retailers across the board. Hopefully, the newly minted tax cut will help as well.
Wall Street is so quick to brand retailers as being either good, bad, ugly, emerging, or apocalyptic.
The truth is that retail is merely a reflection of the emotional health of the population that supports it. If the economy is good, people will shop.
The difference today is that our newest generation of shoppers want to shop in a different way. While older generation retailers were focused on expanding physical footprints, these shoppers were focused on emerging technologies and the internet. The result was excess square footage in the retail space that is currently being eliminated at a rate of about 570 stores a month (in the past year). As soon as the square footage self-corrects, general retail will be just fine.
StyleSage: I know AAFA works closely with brands and retailers around supply chain compliance, and an issue intertwined with this is sustainability. Do you see members understanding and acting upon the notion that sustainability can be a "point of competitive differentiation" for them to leverage? What do you see sustainability evolving from both the brand and the consumer points-of-view?
Rick: In our industry we used to talk about the 4 R’s – providing the right product, with the right fit, at the right price, and at the right time. Succeeding at these R’s led to success. For some time we have been working towards a fifth “R” – doing what is RIGHT. Consumers are more and more concerned with a brand’s environmental and CSR activities in addition to the product itself. During the past decade or so, we have seen a concerted effort by the industry to lead the broader business community on these issues. AAFA is deeply involved in pushing for solutions, and assists our members by providing the opportunity to collaborate on common issues, and by representing the industry in government talks about these issues.
StyleSage: Globalization is intact. Agree or disagree?
Rick: Globalization is not only intact, it is part and parcel to every sound brand strategy. For all the retail business that we do in the U.S., we maintain only 5% of the world’s population. Outreach is essential for any company that wants to grow and be healthy, and globalization provides this opportunity.