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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 2: Hello and welcome to another episode of the All Thoughts podcast.

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Speaker 2: I'm Tracy Alloway.

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Speaker 3: And I'm Joe Wisenthal.

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Speaker 2: Joe, we've been inadvertently doing a tariff series basically on

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Speaker 2: what the trade restrictions mean for a bunch of different industries.

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Speaker 3: So funny that I've read your mind. Yes, it's like

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Speaker 3: we have to go down the list. There's actually it's impossible.

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Speaker 3: You know, every industry is going to be affected by

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Speaker 3: tariffs a different way, and there's this temptation like, Okay,

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Speaker 3: let's just talk to someone from literally every single industry.

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Speaker 4: Today.

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Speaker 3: On May seventh, we released an episode talking about the

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Speaker 3: video game industry. But yes, we could go down the

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Speaker 3: line of every category within GDP and learn something.

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Speaker 2: Video games, len tols, yes, the important stuff. No, So

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Speaker 2: when we're talking about tariffs, I think one of the

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Speaker 2: really big industries that is obviously going to get impacted

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Speaker 2: has to be clothing and textiles. Right, So we know

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Speaker 2: places like China, Vietnam, Sri Lanka, Bangladesh are huge textile exporters,

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Speaker 2: and so we should talk about that and what it

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Speaker 2: actually is like if you're running a clothing business in

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Speaker 2: the US to source textiles from abroad.

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Speaker 3: You know, it's funny. I was at some event for

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Speaker 3: my school and I ran into a fellow dad, or

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Speaker 3: for my kids school, and I ran into a fellow

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Speaker 3: dad with a clothing company. Like the two days after

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Speaker 3: the initial tariffs were revealed in early April, he was

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Speaker 3: talking about he was going to add a button on

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Speaker 3: his website and made some sort of athletic gear, talking

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Speaker 3: about like this is the pre and post tariff prize.

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Speaker 3: He was talking about how it might make sense in

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Speaker 3: certain circumstances to move some of his manufacturing outside the US,

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Speaker 3: especially what he sells to non US customers so much

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Speaker 3: in textiles specifically. The other I think about textiles, of course,

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Speaker 3: is when people think about the China shock. You know,

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Speaker 3: that's one of the first categories that comes to mind,

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Speaker 3: the fact that the US used to have a booming

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Speaker 3: textile industry, particularly in the Southeast, as we know.

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Speaker 2: Yeah, we visited the remnants of the American textile industry

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Speaker 2: in North Carolina.

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Speaker 3: So there's a lot there.

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Speaker 2: Yeah, all right, Well, I am very pleased to say

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Speaker 2: we do, in fact have the perfect guest. I have

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Speaker 2: to do a disclaimer up top because this guest is

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Speaker 2: a longtime friend of mine. We actually went to high

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Speaker 2: school together in Tokyo, and she started her own clothing

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Speaker 2: company and I was involved at the very beginning doing

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Speaker 2: product testing and caveat. I have a lot of their clothes.

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Speaker 2: I have dresses that are I think at this point

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Speaker 2: are like ten years old, but they still look amazing.

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Speaker 2: So I am a big fan of this company. That

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Speaker 2: is my disclaimer.

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Speaker 3: Tracy, did you ever do any modeling?

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Speaker 2: Yes?

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Speaker 3: I thought, did you ever do any modeling for this company?

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Speaker 1: No?

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Speaker 2: Okay, no, no, no, we can talk about that later.

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Speaker 2: I did modeling when I was like seventeen in Tokyo,

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Speaker 2: where the standards are arguably a lot lower. Anyway, I'm

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Speaker 2: very pleased to say we're going to be speaking with

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Speaker 2: Sarah Lafleur. She is the founder and CEO of M M.

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Speaker 4: Lafleur. So, Sarah, thank you so much for coming on

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Speaker 4: off us. Thank you for having me. It's a true honor, sir.

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Speaker 3: What is your favorite Tracy memory? And did you know

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Speaker 3: she would go to go was going to be a

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Speaker 3: star podcaster?

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Speaker 4: One day I thought she was going to be the

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Speaker 4: US ambassador of the United nations.

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Speaker 2: So yeah, I guess she.

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Speaker 4: Was always a true intellectual, uh huh. And I would

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Speaker 4: say precocious beyond her years.

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Speaker 2: So this is yeah, that's probably fair. All right, Sarah,

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Speaker 2: talk to us about the company. How would you describe

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Speaker 2: Amma Lafleur and when did you get started?

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Speaker 4: Sure? So I started the company in twenty thirteen with

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Speaker 4: my two co founders. I myself do not come from

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Speaker 4: the fashion world. I actually worked in management consulting and

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Speaker 4: then in private equity, right, yes, I was at Bain,

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Speaker 4: and you know, I always struggled to kind of find good,

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Speaker 4: well made, appropriate but still very stylish, professional women's clothing.

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Speaker 4: Like I just thought there was a real dearth in

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Speaker 4: the market. And I was never I had never been

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Speaker 4: in fashion. My mother actually worked in high and fashion

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Speaker 4: and she would always bring home these like beautiful, you know,

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Speaker 4: pieces of textiles and got these Chanel suits and I

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Speaker 4: was like, gosh, that's so beautiful, and that's what I'm

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Speaker 4: going to wear when I grow up and I'm a

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Speaker 4: working woman, and lo and behold, I found out, you know,

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Speaker 4: for my budget, I was not going to be wearing

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Speaker 4: a Chanelle suit to work. But the idea stayed with

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Speaker 4: me and basically when I was twenty seven, couldn't get

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Speaker 4: into business school, didn't know what to do with my life.

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Speaker 4: Private equity was not quite the right place for me.

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Speaker 4: I was like, you know what, I've always I've always

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Speaker 4: thought this was a good idea. Let me, let me

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Speaker 4: go for it. So, yeah, it's been gosh, it's been

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Speaker 4: almost twelve years. We launched in twenty thirteen. Were predominantly

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Speaker 4: an e commerce company, but we also have eight stores

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Speaker 4: across the country and we also sell through wholesale.

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Speaker 3: So what do you we'll get into, you know, wanted

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Speaker 3: to get into the nitty gritty of the business and

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Speaker 3: the supply chain and so forth. But from a very

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Speaker 3: big perspective, someone sees an ad for your clothes on Instagram.

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Speaker 3: Maybe they see a shirt or a jacket or pants

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Speaker 3: that they like. Where was it designed? Where did the

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Speaker 3: materials come from, and how did it who put them together?

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Speaker 3: And how do they get to the end?

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Speaker 4: Shopper, Yeah, great question. So we are all designed in

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Speaker 4: New York City. Our offices are, you know, in the

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Speaker 4: Financial District actually, and it's my creative director who usually

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Speaker 4: you start with fabric with collections. I think this is

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Speaker 4: like a little known fact. People always think you sketch

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Speaker 4: first and then you find the fabrics, right, But it's

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Speaker 4: really so much of fashion is really led by the

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Speaker 4: fabric and textile industry. So you you know, often you

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Speaker 4: go to these fabric shows or these fabric mills come

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Speaker 4: to you, you're inspired by different fabrications, and then you

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Speaker 4: take that and you say, okay, what am I going

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Speaker 4: to design into this. Maybe it's a jacket, maybe it's

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Speaker 4: a shirt, what have you. And then from there the

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Speaker 4: designer sketches and then the pattern maker, very important person

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Speaker 4: I call you know, this person is like the architect

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Speaker 4: of the clothing, will actually then say, okay, in order

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Speaker 4: for this dress, let's say, to come to life, here's

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Speaker 4: how the fabric needs to be laid out on a

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Speaker 4: piece of you know, on a piece of fabric, and

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Speaker 4: cut and then put together. Different companies do different things,

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Speaker 4: but you know, if you are working with a fabric

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Speaker 4: factory overseas, then oftentimes you will then send the pattern

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Speaker 4: overseas to the factory. The factory will do the first

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Speaker 4: what we call fit sample that gets sent back to

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Speaker 4: New York. You fit it in New York, you know,

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Speaker 4: with your fit model, and you know, depending on whether

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Speaker 4: you're a brand that spends a lot of money on

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Speaker 4: product development or not, you might do one too, even

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Speaker 4: up to three fit samples before you ultimately go into

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Speaker 4: production in the factory overseas.

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Speaker 2: Wow. Okay, So, given the importance of the fabric in

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Speaker 2: the design process, talk to us a little bit more

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Speaker 2: about how you actually source that because the fabrics that

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Speaker 2: you use are also a big differentiator for you. Right,

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Speaker 2: you have very special fabrics and again I'm going to

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Speaker 2: sound like I'm doing an ad for this company. We

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Speaker 2: love that, but I mean they're great fabrics for work

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Speaker 2: where they really are and they're sort of specially made

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Speaker 2: is my understanding for exactly that scenario.

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Speaker 4: Yeah, we really focus on machine washability and wrinkle resistance.

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Speaker 4: So Japan is great with that. You know, it's not

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Speaker 4: your mother's polyester. Synthetic fibers have really come a long way.

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Speaker 4: So there are a lot of synthetic fibers that behave

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Speaker 4: like silk or look like silk, but are still machine

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Speaker 4: washable wrinkle resistant. But we also love natural fibers and

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Speaker 4: natural fibers. You know, places that are good at that

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Speaker 4: historically are when it comes to wool, Italy Germany. When

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Speaker 4: it comes to silk, China, like, China is really one

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Speaker 4: of the few countries now left in the world that

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Speaker 4: still actually does silk. Same for wool in cashmere. You know,

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Speaker 4: if you want to do alp haka, well I'll paka

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Speaker 4: like you could still go to Peru. There are other places.

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Speaker 4: But when it comes to most will most cashmeir, I

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Speaker 4: would say it's China. You could go to Mongolia for Kashmir,

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Speaker 4: but there aren't that many places across the world that

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Speaker 4: that do these natural fibers.

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Speaker 3: For the types of sort of high end stylish clothes

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Speaker 3: that you sell. Where are the big manufacturing hubs right now,

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Speaker 3: and where do you, like, you know, explain the link. Okay,

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Speaker 3: there might be some you know, textile company that's really

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Speaker 3: good at you know, advanced synthetics in Japan. I know

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Speaker 3: that well because I buy all my clothes from Uniclo

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Speaker 3: and they never wrinkle, which is really nice because I'm

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Speaker 3: very lazy. But then talk to us about like, okay,

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Speaker 3: how what is the process from like getting the textiles

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Speaker 3: to wherever they're actually cut in a symbol?

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Speaker 4: Yeah, great question. Some factories are vertically integrated, meaning they

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Speaker 4: both make the fabrics or you know, they have a

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Speaker 4: partner from whom they source the fabrics and then they

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Speaker 4: produce the actual clothing at their factories. I would say generally,

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Speaker 4: although not always, lower priced products are made this way.

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Speaker 4: If you are for us, we like to nominate our fabrics.

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Speaker 4: That's the word that's used in the industry, meaning we

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Speaker 4: are specifying where the fabric should come from, what we

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Speaker 4: want it to be, and which mill we want it

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Speaker 4: to come from. And then the factory, which is often

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Speaker 4: in a different country they usually are not in the

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Speaker 4: same country, takes on that fabric from that mill and

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Speaker 4: then cuts it and produces it. So often, though not always,

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Speaker 4: the two things, the fabric mill and the factory are

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Speaker 4: two different companies in two different countries.

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Speaker 2: So how do you find factories and mills to work with?

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Speaker 2: And I guess a questions as a startup founder, what

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Speaker 2: was your first experience actually finding a factory slash mill?

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Speaker 4: Actually? Like, well, I think I prefaced earlier that I

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Speaker 4: never worked in fashion, and so literally I contacted the

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Speaker 4: New York City I think, you know, I was an

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Speaker 4: economic development corporation and for a lot of fashion designers

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Speaker 4: right who are trying to get their foot in the

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Speaker 4: door and start their own line. The garment district in

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Speaker 4: New York City is amazing, and I would say, I

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Speaker 4: mean when I got started a decade ago, he was

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Speaker 4: it was I mean, yes, a declining industry, but definitely

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Speaker 4: more bustling than it was now. And there was a

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Speaker 4: directory of factories that you could contact. But I mean

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Speaker 4: it was kind of laughable because a lot of these

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Speaker 4: factories A don't use email. I think they may have

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Speaker 4: a phone which they may pick up if it's a

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Speaker 4: good day. Really, these factories, the way you get in

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Speaker 4: the door is by knowing somebody who's worked with them,

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Speaker 4: and even then they may not be willing to take

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Speaker 4: you on. You know, it's a huge risk for them. A.

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Speaker 4: Can this designer actually pay for whatever it is that

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Speaker 4: I'm going to do? And B is this designer actually

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Speaker 4: going to be around a year from now? Because you know,

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Speaker 4: fashion people come and go so fast, and so unless

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Speaker 4: it's through a connection or a referral or you're you know,

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Speaker 4: somewhat established, it's really hard to get your foot on

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Speaker 4: the door. I mean, I was begging people to take

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Speaker 4: my orders when we first got started and we were

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Speaker 4: doing manufacturing in the garment district.

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Speaker 3: Oh, you're doing manufacturing in the garment district.

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Speaker 4: This was this was a decade ago, but yeah, I

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Speaker 4: got it today.

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Speaker 3: If you want to go to a factory somewhere in

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Speaker 3: Asia and you have the textiles, what are like some

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Speaker 3: of the minimums you know, like what's a minimum run?

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Speaker 3: Because I have to like, like you said, you know,

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Speaker 3: they want to know that you're still going to be

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Speaker 3: around from now. They have to allocate capacity. They presumably

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Speaker 3: don't want to just allocate a little capacity and then

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Speaker 3: have to change talk to us about like what you

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Speaker 3: have to bring to the table from a volume standpoint,

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Speaker 3: in terms of a reliability standpoint, in terms of a

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Speaker 3: dollar standpoint, such that it's worth taking you in the door.

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Speaker 4: There's huge variability in both factories within one country and

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Speaker 4: then from country to country. Right, So I would say China,

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Speaker 4: Once upon a time, probably the moq's limitedmnium order quantities

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Speaker 4: were north of a thousand easily okay. But now as

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Speaker 4: wages in China have gone up, a lot of factories

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Speaker 4: that we work with are willing to do moqus as

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Speaker 4: low as one hundred. There might be a sort charge

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Speaker 4: for it.

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Speaker 3: Wait, why is the lower volume? Why take lower volume

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Speaker 3: as wages.

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Speaker 4: Have gone up because brands have moved to other places

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Speaker 4: like Bangladesh, places in Northern Africa. I mean it is.

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Speaker 4: I don't want to say it's a race to the bottom,

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Speaker 4: but it is in many ways. You know, as labor

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Speaker 4: prices rise, brands are always saying like, Okay, well I

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Speaker 4: gotta go cheaper, I gotta go cheaper. Oh interesting, So

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Speaker 4: they you know, first went to Southeast Asia, they moved

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Speaker 4: over to you know, South Asia, you know India. Bangladesh

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Speaker 4: still does a lot of you know units where they

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Speaker 4: need one thousand, two thousand, sometimes north of ten thousand units.

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Speaker 4: And then also Northern Africa is now kind of considered

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Speaker 4: the next frontier tracy. This is interesting.

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Speaker 2: You know.

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Speaker 3: One of the things I've seen a couple of people

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Speaker 3: talk about is like China experiencing its own China shock

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Speaker 3: because some of these low end textiles, those legacy operations

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Speaker 3: are now competing with cheaper wage countries, the same way

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Speaker 3: textile companies in the US for competing with other Asian countries.

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Speaker 4: Yeah.

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Speaker 2: Absolutely, Okay, So Sarah, we got to get to the

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Speaker 2: meat of this discussion. I guess let's talk about the tariffs.

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Speaker 2: So when I when I asked you about this issue,

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Speaker 2: you said that teriffs were all you've been thinking about

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Speaker 2: for basically the past month.

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Speaker 4: Yes, and even that feels like an understatement. I think

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Speaker 4: I dream about it. I mean, it is been so

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Speaker 4: detrimental to the business. It's not like running a fashion

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Speaker 4: business in twenty twenty five was a cakewalk. Right. It's

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Speaker 4: already an incredibly competitive business with razor thin margins. We're

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Speaker 4: dealing with pressures on the marketing side from you know,

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Speaker 4: Meta and Google, right. I mean, we just went through

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Speaker 4: the pandemic where I had to close all eleven of

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Speaker 4: my stores and then gradually open them back up again

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Speaker 4: to the point where now we have eight. I mean,

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Speaker 4: it was it was devastating going through the pandemic, and

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Speaker 4: we survived by the skin of our teeth. We've made

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Speaker 4: it through the other end. We had just finished budgeting

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Speaker 4: for twenty twenty five, and I think, you know, this

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Speaker 4: will probably be not a total surprise that I'm a

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Speaker 4: New Yorker. But you know, we were saying, okay, when

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Speaker 4: when Kamala Harrison get elected, we were like, well, everyone

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Speaker 4: says Trump's going to be good for business. We have

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Speaker 4: a big business in Washington, d C. Change of administration

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Speaker 4: is usually also good for our business. The first thing

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Speaker 4: we came, you know, ran across was the Doge cuts.

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Speaker 4: So our two DC stores are down about twenty to

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Speaker 4: twenty five percent from l Y while all of our

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Speaker 4: customers that come in are either have been laid off

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Speaker 4: or are nervous that they are going to get laid off,

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Speaker 4: or that they're going to have they're going to be

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Speaker 4: some repercussions. So we were already feeling those effects going

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Speaker 4: into March. I still remember the moment the U what

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Speaker 4: was it, Liberation.

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Speaker 2: Day, April second.

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Speaker 4: Yeah, yes, I was sitting in my office. We were

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Speaker 4: doing a meeting and my phone blew up. I'm on,

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Speaker 4: you know, various text change with other fashion founders and CEOs,

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Speaker 4: and they're saying, have you seen the numbers? And you know,

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Speaker 4: I mean just that's all we could focus on.

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Speaker 2: You are one of the people squinting at the billboards.

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Speaker 4: Aha, ha, we were, And I was like, someone get

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Speaker 4: a screenshot of this. Anyway, the numbers were kind of

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Speaker 4: beyond I think what anyone of us expected, right, And

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Speaker 4: I remember I was actually in China, Hong Kong, in

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Speaker 4: Vietnam where a lot of our partners were or are

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Speaker 4: in November, and you know, we were all talking about

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Speaker 4: and like, how bad do you think it's going to be?

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Speaker 4: And one of my partners was like, you know, I

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Speaker 4: don't think it can be that bad because where else

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Speaker 4: are you going to get your silk? I mean, where

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Speaker 4: else are you gonna get your silk? So I predict

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Speaker 4: ten percent. It can't be higher than ten percent. Yeah,

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Speaker 4: And then when we saw the fifty four percent on

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Speaker 4: top of the thirty percent we were already encountering, we

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Speaker 4: were like, well, that's just insane. And then it just

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Speaker 4: got worse and worse and worse. I mean, i'll tell

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Speaker 4: you between Liberation Day April second, and then April eleventh,

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Speaker 4: we were on calls with our factories like night and day.

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Speaker 4: I don't think I don't think my factory partners slew

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Speaker 4: for those seven days. You know, any hour of any

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Speaker 4: day we could reach them, and we were just basically saying,

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Speaker 4: get it on the boat, get it on the boat,

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Speaker 4: except it was total chaos at the ports. So it's

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Speaker 4: just like, you know, after forty eight seventy two hours,

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Speaker 4: it was like we couldn't even secure a space on

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Speaker 4: the boat and like the night before it's all about

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Speaker 4: to go down, you know, I'm on a call with

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Speaker 4: one of my partners in Hong Kong, and I'm like,

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Speaker 4: did you get it on the boat? And he was

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Speaker 4: like no, I couldn't get this on the boat. And

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Speaker 4: then I was like, okay, then don't put it on

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Speaker 4: the boat. And then you know, and then whenever I

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Speaker 4: can't even remember the exact timeline now, but whenever, you know,

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Speaker 4: we went into whenever it we went into it, like

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Speaker 4: the ninety day grace period, I was like, get it

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Speaker 4: on the boat, get it on the boat. I mean,

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Speaker 4: it just felt like it just felt like I hate

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Speaker 4: to use this metaphor, but like it's like the last

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Speaker 4: ship or the last helicopter out of Saigon and everyone's

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Speaker 4: just like trying to get their things on. Yeah.

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Speaker 3: I mean, it's okay metaphor because one, you know, that's

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Speaker 3: the helicopter, but it's still probably you know, still coming

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Speaker 3: out of Vietnam. But actually, what is so right now

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Speaker 3: we're recording this May seventh, I guess two questions is like,

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Speaker 3: what is your like sort of geographical exposure because that's China,

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Speaker 3: it's to only ten percent and and it may get

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Speaker 3: I think you know a lot of people think that

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Speaker 3: will get even if there's no deals, that that ten

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Speaker 3: percent will get extended. What is your current geographical exposures?

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Speaker 3: But to the ten percent and one hundred and fifty

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Speaker 3: four percent.

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Speaker 4: Well, I had to cancel fifty percent of my May collection. Wow,

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Speaker 4: because they were all from China Okay. Many of the

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Speaker 4: things were late because they were coming out of places

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Speaker 4: like Vietnam, Okay, where it was initially hit with the

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Speaker 4: fifty four percent and we were saying, oh, I'm sorry,

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Speaker 4: it was forty seven percent. We said, don't don't chip it.

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Speaker 3: Oh, so there were even though there was got plus

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Speaker 3: even back to ten percent fairly quickly.

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Speaker 4: It had to create a hiccup totally because it's like fashion.

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Speaker 4: It's like it's all about your selling window, right, and

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Speaker 4: you bring in your summer clothes and you want to

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Speaker 4: sell through most of it within six weeks, and if

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Speaker 4: you miss that selling window, well then we'll wait till

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Speaker 4: next year. And so some of our products are going

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Speaker 4: to be held for a whole year and they're going

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Speaker 4: to wait for summer twenty twenty six to be released.

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Speaker 4: I mean, this is just I'd chalk it up to

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Speaker 4: bad luck. But we actually we have partners in Turkey,

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Speaker 4: we have partners in Portugal, China and Vietnam, but by

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Speaker 4: far we do most of our production in China. Got it?

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Speaker 4: And why is that? It's because the quality is exceptional,

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Speaker 4: the prices are not cheap. You know, I have customers

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Speaker 4: who've because we've been really communicating transparently with our customers, saying,

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Speaker 4: you know, here are the consequences that we're facing and

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Speaker 4: our fact Our customers are you know, very sharp, intelligent women,

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Speaker 4: and I've had many of them email me saying like,

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Speaker 4: you know, I'm really sorry to hear all this. I'm

382
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Speaker 4: going to support your business, but like why don't you

383
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Speaker 4: move your production back to the US? Like why don't

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Speaker 4: you move it back to the garment district? And I'm like,

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Speaker 4: I don't even know how to explain, Like that's that

386
00:19:58,920 --> 00:20:03,720
Speaker 4: industry is not only dying in many cases gone, it

387
00:20:03,760 --> 00:20:06,160
Speaker 4: could never support the kind of quantity that we want

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Speaker 4: to do. And by the way, we're not even that

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Speaker 4: big a business, you know. And you know, they sometimes

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Speaker 4: I get like I knew, I knew it was made

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Speaker 4: in China because you know, the qualities was X y

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Speaker 4: Z and I was like, you know, I was like,

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Speaker 4: have you ever seen the inside of a factory in China?

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Speaker 4: Because you know, the workers who work there, they get

395
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Speaker 4: free lunch. They have a farm at the factory where

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Speaker 4: they make fresh vegetables and their lunch is served using

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00:20:35,280 --> 00:20:39,920
Speaker 4: those fresh vegetables. And they have these beautiful, beautiful dormitories.

398
00:20:40,240 --> 00:20:43,159
Speaker 4: Like there is a lot that these Chinese factories do

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Speaker 4: right to treat their workers right. And meanwhile, the garment

400
00:20:47,000 --> 00:20:51,440
Speaker 4: district factories, everyone brings their own toilet paper because if

401
00:20:51,520 --> 00:20:54,880
Speaker 4: they put toilet paper in the toilets, they will get stolen. Right,

402
00:20:55,280 --> 00:20:59,440
Speaker 4: Like everyone thinks like made in New York, beautiful, excellent quality,

403
00:20:59,680 --> 00:21:04,919
Speaker 4: like great labor regulation. It is not the case. You know,

404
00:21:06,000 --> 00:21:08,360
Speaker 4: if it happens, it's very few factories that are very

405
00:21:08,359 --> 00:21:11,640
Speaker 4: selective and very very expensive. The truth is, the American

406
00:21:11,680 --> 00:21:14,600
Speaker 4: consumer does not want to spend that much on clothing,

407
00:21:14,760 --> 00:21:17,960
Speaker 4: as prices have gone up in every single other category.

408
00:21:18,280 --> 00:21:22,480
Speaker 4: Clothing has remained relatively stable since the nineteen nineties. And

409
00:21:23,000 --> 00:21:25,360
Speaker 4: so we can't have it both ways, you know, if

410
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Speaker 4: you want to continue to buy clothing at the prices

411
00:21:29,080 --> 00:21:32,160
Speaker 4: that we're used to, we have to have global trade.

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Speaker 2: Yeah, So you mentioned transparency with customers. Talk to us

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Speaker 2: about how you're handling the pricing side of things at

414
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Speaker 2: the moment. Are you Are you going to put a

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Speaker 2: little button that shows the pre tiff and post tariff

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Speaker 2: price or something like that.

417
00:21:46,720 --> 00:21:49,560
Speaker 4: I am so, I'm so tempted to, But you know

418
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Speaker 4: what I worry about is that she's just not gonna

419
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Speaker 4: buy it just transparently. We've already done a round of

420
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Speaker 4: cost cutting, and from where I'm sitting, I see recession

421
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Speaker 4: on the horizon. So I feel like when I see

422
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Speaker 4: recession coming, I don't know if I can also increase

423
00:22:06,560 --> 00:22:11,960
Speaker 4: prices and expect customers to just eat it and get

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Speaker 4: on board with it. So you know, I'm getting my

425
00:22:14,960 --> 00:22:18,200
Speaker 4: margins squeezed. We're looking at our August collection right now.

426
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Speaker 4: My August collection, unfortunately, is one hundred percent made in China,

427
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Speaker 4: and we are making very serious trade offs about what

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00:22:25,680 --> 00:22:30,159
Speaker 4: we're willing to pay a big, big tariffs on and

429
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Speaker 4: bring in versus what we're willing to let go. And

430
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Speaker 4: also my factory partners, like this clothing has already made,

431
00:22:36,160 --> 00:22:39,280
Speaker 4: August has already been made, sown, it's in a box,

432
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Speaker 4: ready to get on a boat, and they're desperate because

433
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Speaker 4: they've already put in their investment, so they're also negotiating

434
00:22:46,760 --> 00:22:49,159
Speaker 4: with us, saying, hey, if I were willing to reduce

435
00:22:49,200 --> 00:22:50,000
Speaker 4: my prices by.

436
00:22:50,000 --> 00:22:52,159
Speaker 3: Yeah, that's what I was wondering. How to what degree

437
00:22:52,240 --> 00:22:55,240
Speaker 3: are those conversations happening about the factory site eating the

438
00:22:55,320 --> 00:22:56,639
Speaker 3: costs or giving you reduction.

439
00:22:56,840 --> 00:22:59,600
Speaker 4: It's happening, I would say, across the board, you know,

440
00:22:59,640 --> 00:23:02,399
Speaker 4: we're or they're saying, like, my goal right now is

441
00:23:02,480 --> 00:23:04,920
Speaker 4: just really to be able to cover my costs. And

442
00:23:05,040 --> 00:23:06,720
Speaker 4: you know, I was like, well, you know, I've been

443
00:23:06,720 --> 00:23:09,440
Speaker 4: hearing these things about like the Chinese government doesn't want

444
00:23:09,440 --> 00:23:12,280
Speaker 4: any of these factories to fail, Like like are they

445
00:23:12,280 --> 00:23:14,320
Speaker 4: what's gonna happen? Is there going to be a version

446
00:23:14,359 --> 00:23:17,840
Speaker 4: of you know, Ppe, the Ppe loan in China? Like

447
00:23:17,960 --> 00:23:21,400
Speaker 4: how how how are you guys going to survive? They're saying,

448
00:23:21,440 --> 00:23:23,360
Speaker 4: I think they're going to pump more money into the banks,

449
00:23:23,400 --> 00:23:26,200
Speaker 4: but none of this money is directly coming to the factories,

450
00:23:26,200 --> 00:23:28,000
Speaker 4: Like they're fighting for their survival too.

451
00:23:29,080 --> 00:23:32,280
Speaker 2: What are the other levers that the factories can pull

452
00:23:32,400 --> 00:23:34,840
Speaker 2: to try to offset some of the impacts, so you know,

453
00:23:35,000 --> 00:23:38,760
Speaker 2: maybe offer discounts to clients but is there anything else

454
00:23:38,800 --> 00:23:41,480
Speaker 2: they can do to sort of deal with the situation.

455
00:23:41,880 --> 00:23:44,280
Speaker 4: One of my factory partners actually wants to launch am

456
00:23:44,400 --> 00:23:46,840
Speaker 4: Laflur in China. Oh. He was like, Hey, I'm gonna

457
00:23:46,840 --> 00:23:49,280
Speaker 4: be stuck with all this inventory. What do you think

458
00:23:49,320 --> 00:23:51,600
Speaker 4: about m M laflur for the Chinese market? And I

459
00:23:51,640 --> 00:23:53,919
Speaker 4: was like, go for it, like I've always wanted to

460
00:23:53,920 --> 00:23:56,119
Speaker 4: do it. It's not it's not as though, you know, so

461
00:23:56,240 --> 00:23:59,800
Speaker 4: like I don't know from from great challenges could come opportunities,

462
00:24:00,040 --> 00:24:02,200
Speaker 4: but it's a long shot, I mean. And so we're

463
00:24:02,240 --> 00:24:04,440
Speaker 4: also looking at that as well. And he's saying, send

464
00:24:04,480 --> 00:24:05,879
Speaker 4: me all the product that's going to be stuck in

465
00:24:05,960 --> 00:24:08,399
Speaker 4: China and let's see if we can actually launch a

466
00:24:08,480 --> 00:24:11,720
Speaker 4: memla Flur China. So it's not as though, you know,

467
00:24:11,840 --> 00:24:14,159
Speaker 4: they're not you know, they're also thinking of every creative

468
00:24:14,200 --> 00:24:17,840
Speaker 4: solution possible. We're firing on all cylinders. And then of course,

469
00:24:17,920 --> 00:24:20,840
Speaker 4: like there's the country washing that's happening. I know, I

470
00:24:20,920 --> 00:24:22,920
Speaker 4: know that we're very careful about it and trying to

471
00:24:22,920 --> 00:24:23,960
Speaker 4: make sure it doesn't happen.

472
00:24:24,040 --> 00:24:27,760
Speaker 2: But this is the idea of moving production elsewhere totally.

473
00:24:27,840 --> 00:24:30,560
Speaker 4: And I should say like finished product elsewhere right now, this.

474
00:24:30,560 --> 00:24:32,560
Speaker 3: Is right, So it's not the production, it's basically live.

475
00:24:32,920 --> 00:24:35,280
Speaker 4: It's exactly it's the product is finished, send it to

476
00:24:35,280 --> 00:24:38,800
Speaker 4: a third country, switch out the label, and ship it

477
00:24:38,840 --> 00:24:41,320
Speaker 4: to the United States. I've got three kids, so I

478
00:24:41,320 --> 00:24:43,840
Speaker 4: can't end up in prison. But I know for a

479
00:24:43,880 --> 00:24:46,840
Speaker 4: fact that it happens, and it'll probably happen a lot,

480
00:24:46,920 --> 00:24:49,600
Speaker 4: and gosh, I mean, I'm sure the government will make

481
00:24:49,600 --> 00:24:51,680
Speaker 4: an example out of a few of them, but it's

482
00:24:51,680 --> 00:24:53,919
Speaker 4: going to be impossible to trace all of them, so

483
00:24:54,040 --> 00:24:56,280
Speaker 4: that that's going to be that's definitely going to happen

484
00:24:56,320 --> 00:24:56,960
Speaker 4: across the board.

485
00:24:57,359 --> 00:25:00,920
Speaker 2: Joe, there is an irony in the idea that like, okay,

486
00:25:01,080 --> 00:25:04,679
Speaker 2: Chinese consumers could end up having more clothing choices in

487
00:25:04,720 --> 00:25:08,480
Speaker 2: the form of an mm Lafleur store in Beijing or

488
00:25:08,520 --> 00:25:11,760
Speaker 2: something like that, and meanwhile, you know, the clothing available

489
00:25:11,800 --> 00:25:14,240
Speaker 2: to American consumers is potentially shrinking.

490
00:25:14,480 --> 00:25:16,600
Speaker 3: Well it's you know, I was actually talking to someone

491
00:25:16,760 --> 00:25:19,720
Speaker 3: this morning and they're like, yeah, inflationary in the US

492
00:25:19,840 --> 00:25:23,040
Speaker 3: and disinflationary everywhere else in the world because of the

493
00:25:23,119 --> 00:25:23,880
Speaker 3: sort of blood of good.

494
00:25:24,000 --> 00:25:26,320
Speaker 2: Yeah, the US is the one exporting deflation.

495
00:25:26,440 --> 00:25:29,120
Speaker 3: Now, Yeah, that's right. It's actually it's actually kind of strange.

496
00:25:29,440 --> 00:25:32,960
Speaker 3: The factories that you work with in China, what have

497
00:25:33,040 --> 00:25:35,760
Speaker 3: they done either in recent years or when they look

498
00:25:35,840 --> 00:25:39,560
Speaker 3: to the future about bringing their know how in capacity

499
00:25:39,600 --> 00:25:43,160
Speaker 3: to other Asian countries. So then it actually is manufactured

500
00:25:43,160 --> 00:25:46,640
Speaker 3: in Vietnam and how much capacity work it's being done

501
00:25:46,680 --> 00:25:47,320
Speaker 3: on those fronts.

502
00:25:47,480 --> 00:25:51,000
Speaker 4: Yeah, I mean, I think even from the last Trump administration,

503
00:25:51,160 --> 00:25:53,159
Speaker 4: a lot of Chinese factories kind of saw the writing

504
00:25:53,200 --> 00:25:56,240
Speaker 4: on the wall and so they were diversifying their sources.

505
00:25:56,240 --> 00:25:59,160
Speaker 4: And so I have some factory partners that have opened

506
00:25:59,200 --> 00:26:02,239
Speaker 4: up factories in Vietnam in the Philippines, and I mean

507
00:26:02,280 --> 00:26:04,400
Speaker 4: it's it's kind of fascinating because all the workers will

508
00:26:04,440 --> 00:26:07,440
Speaker 4: be Vietnamese, but the you know, the kind of leaders

509
00:26:07,480 --> 00:26:10,840
Speaker 4: in the factory are all from Hong Kong, and even

510
00:26:10,840 --> 00:26:12,560
Speaker 4: that is tough. Like I think one thing that's like

511
00:26:12,680 --> 00:26:17,120
Speaker 4: not understood about garment manufacturing is it's a real trade.

512
00:26:17,320 --> 00:26:19,800
Speaker 4: And your best sewers are people who have been doing

513
00:26:19,800 --> 00:26:22,720
Speaker 4: this for decades, you know, like you're you're a baby

514
00:26:22,760 --> 00:26:25,480
Speaker 4: sewer if you've only been doing this for like five

515
00:26:25,520 --> 00:26:28,560
Speaker 4: to ten years. The people who make your samples, you know,

516
00:26:28,760 --> 00:26:29,680
Speaker 4: your best sewing you.

517
00:26:30,040 --> 00:26:32,240
Speaker 3: And this is another reason why it's fantasy, the idea

518
00:26:32,280 --> 00:26:33,640
Speaker 3: that this can all be done us, because.

519
00:26:33,440 --> 00:26:35,440
Speaker 4: They're just do you even know how to use a

520
00:26:35,440 --> 00:26:36,640
Speaker 4: sewing machine? I don't.

521
00:26:36,960 --> 00:26:38,879
Speaker 2: I just bought a sewing machine. I'm going to use

522
00:26:38,920 --> 00:26:41,680
Speaker 2: it for the first time tonight. I'm very excited and nervous.

523
00:26:41,800 --> 00:26:44,040
Speaker 4: Great, there you go. Those are most Americans, you know,

524
00:26:44,200 --> 00:26:46,879
Speaker 4: very intellectual. They might know how to code, but they couldn't.

525
00:26:46,920 --> 00:26:49,080
Speaker 4: They don't know the first thing about how to use

526
00:26:49,119 --> 00:26:52,040
Speaker 4: a sewing machine. And they're like, bring garment manufacturing back

527
00:26:52,080 --> 00:26:54,320
Speaker 4: to America. And I was like, people don't know how

528
00:26:54,359 --> 00:26:55,920
Speaker 4: to sew a button on they bring it to the

529
00:26:56,000 --> 00:27:00,359
Speaker 4: dry cleaners, Like, in what world is garment manufacturing actually

530
00:27:00,359 --> 00:27:04,080
Speaker 4: going to come back? So it's just it's it's kind

531
00:27:04,119 --> 00:27:07,280
Speaker 4: of preposterous to imagine that that's a future.

532
00:27:08,080 --> 00:27:11,640
Speaker 3: And therefore it's even slow. And this at the level

533
00:27:11,640 --> 00:27:14,439
Speaker 3: of quality that you expect for your clothes. It's not

534
00:27:14,560 --> 00:27:18,679
Speaker 3: trivial to transport have those skills and capacity emerge into

535
00:27:18,720 --> 00:27:19,880
Speaker 3: Cambodia or Vietnam.

536
00:27:19,960 --> 00:27:22,120
Speaker 4: Oh oh my gosh. Yes, okay, So like I'm let

537
00:27:22,119 --> 00:27:24,720
Speaker 4: me go back to silk, right because silk is silk

538
00:27:24,800 --> 00:27:28,520
Speaker 4: is a very hard material. First of all, you need

539
00:27:28,560 --> 00:27:31,960
Speaker 4: to start with like the mulberry trees and the silkworms, right,

540
00:27:32,040 --> 00:27:36,119
Speaker 4: And I mean creating silk is a very long supply

541
00:27:36,200 --> 00:27:40,320
Speaker 4: chain and a very difficult supply chain. China is one

542
00:27:40,320 --> 00:27:42,000
Speaker 4: of the few countries that actually do it. And then

543
00:27:42,200 --> 00:27:45,000
Speaker 4: sewing silk. Silk is super slippery, right, Like that's kind

544
00:27:45,040 --> 00:27:46,880
Speaker 4: of you. You can make sense of it, Like trying

545
00:27:46,880 --> 00:27:49,080
Speaker 4: to sew silk in a sewing machine takes a really

546
00:27:49,119 --> 00:27:52,320
Speaker 4: skilled hand. So you know, China is the only place

547
00:27:52,320 --> 00:27:55,520
Speaker 4: where we do silk, and I we literally don't have

548
00:27:55,560 --> 00:27:58,359
Speaker 4: another country to move silk to, Like we're saying like

549
00:27:58,680 --> 00:28:01,920
Speaker 4: maybe the Philippine can take it if it's owned by

550
00:28:01,960 --> 00:28:06,880
Speaker 4: a Chinese factory, Like we're desperately looking for a new

551
00:28:06,880 --> 00:28:10,680
Speaker 4: silk factory. I mean this, I say to all all

552
00:28:10,720 --> 00:28:13,280
Speaker 4: people who shop for Christmas in Hanukah, like, buy your

553
00:28:13,320 --> 00:28:15,000
Speaker 4: silk now, because you're not going to see it for

554
00:28:15,080 --> 00:28:15,440
Speaker 4: a while.

555
00:28:31,480 --> 00:28:34,640
Speaker 2: You mentioned earlier that you see recession on the horizon.

556
00:28:35,000 --> 00:28:37,440
Speaker 2: Talk to us about why you think that. And then

557
00:28:37,520 --> 00:28:41,440
Speaker 2: also like how useful or how accurate has the clothing

558
00:28:41,480 --> 00:28:46,720
Speaker 2: business been in predicting previous recessions. I know, well, you've

559
00:28:46,760 --> 00:28:49,440
Speaker 2: only been in existence for ten years or so, twelve

560
00:28:49,520 --> 00:28:52,840
Speaker 2: years maybe, so there aren't that many examples. But I imagine

561
00:28:52,840 --> 00:28:56,400
Speaker 2: like at this point you have some experience. Well it feels.

562
00:28:56,640 --> 00:28:58,840
Speaker 4: I was just at like a retail industry dinner and

563
00:28:58,840 --> 00:29:01,520
Speaker 4: they were joking like every year is a new black

564
00:29:01,560 --> 00:29:04,920
Speaker 4: Swan event, and I was like, yes, I do really

565
00:29:04,960 --> 00:29:08,000
Speaker 4: feel that way. From the pandemic to you know, Silicon

566
00:29:08,080 --> 00:29:10,640
Speaker 4: Valley Bank going under to actually one of our other

567
00:29:10,720 --> 00:29:12,800
Speaker 4: lenders also went under. And now this.

568
00:29:13,880 --> 00:29:15,680
Speaker 2: I think SVB was a lender for you.

569
00:29:16,240 --> 00:29:19,560
Speaker 4: Yes, we banked with sphoeb It was yeah, you know,

570
00:29:19,640 --> 00:29:22,520
Speaker 4: seventy two hours that I never hoped to experience again.

571
00:29:22,920 --> 00:29:26,320
Speaker 4: But I think what this is. I consider myself an optimist, right, Like,

572
00:29:26,440 --> 00:29:29,600
Speaker 4: why else would I be an entrepreneur, and you know,

573
00:29:29,680 --> 00:29:32,600
Speaker 4: be foolish enough to think that we are the one

574
00:29:32,640 --> 00:29:35,959
Speaker 4: percent that will somehow make it through. And yet all

575
00:29:36,040 --> 00:29:38,160
Speaker 4: these experiences over the past five years, I mean they

576
00:29:38,200 --> 00:29:42,560
Speaker 4: have hardened me. I've definitely become significantly more conservative in

577
00:29:43,000 --> 00:29:47,600
Speaker 4: all of my predictions and forecasting. And basically, you know, yes,

578
00:29:47,640 --> 00:29:50,360
Speaker 4: everyone's saying like, oh, don't worry, Tariff's gonna like come

579
00:29:50,400 --> 00:29:54,600
Speaker 4: down again, like you know, Trump's not gonna actually do it,

580
00:29:54,720 --> 00:29:57,000
Speaker 4: like they're gonna call his bluff. And I was like,

581
00:29:57,000 --> 00:29:59,400
Speaker 4: it doesn't matter. The damage has been done, like I've

582
00:29:59,440 --> 00:30:03,120
Speaker 4: already cut my costs, Like maybe maybe he'll undo it,

583
00:30:03,160 --> 00:30:05,080
Speaker 4: but then who's to say he won't do it again.

584
00:30:05,800 --> 00:30:09,960
Speaker 4: And so I've clamped down on every expenditure possible.

585
00:30:10,400 --> 00:30:13,320
Speaker 2: So on this note, you said April second, you had

586
00:30:13,360 --> 00:30:15,800
Speaker 2: just finished your business plan, Like how do you actually

587
00:30:15,880 --> 00:30:22,160
Speaker 2: incorporate this type of uncertainty into planning and hard numbers?

588
00:30:22,360 --> 00:30:24,840
Speaker 4: It's really hard. And by the way, because I still

589
00:30:24,840 --> 00:30:27,320
Speaker 4: don't actually know how much inventory we're going to receipt

590
00:30:27,320 --> 00:30:29,760
Speaker 4: for the rest of the year, right, I went as

591
00:30:29,800 --> 00:30:33,840
Speaker 4: conservatively as I thought I could without breaking the business.

592
00:30:33,920 --> 00:30:35,840
Speaker 4: And you know, when we're talking about cutting costs, like

593
00:30:36,120 --> 00:30:40,080
Speaker 4: there's no you know, people use the expression like cut fat,

594
00:30:40,120 --> 00:30:42,160
Speaker 4: like there's no fat left to cut, like I'm cutting

595
00:30:42,160 --> 00:30:44,800
Speaker 4: into the muscle. But you know, survival is the name

596
00:30:44,840 --> 00:30:47,000
Speaker 4: of the game, So that's what we're going through.

597
00:30:47,080 --> 00:30:50,719
Speaker 3: This isn't specifically terrif related, but since you mentioned it

598
00:30:50,920 --> 00:30:54,600
Speaker 3: in the earlier in the episode, I'm curious, what are

599
00:30:54,640 --> 00:31:00,120
Speaker 3: you seeing on the digital channel side. You mentioned, you know,

600
00:31:00,200 --> 00:31:04,840
Speaker 3: fighting frideballs or selling through meta and all these platforms.

601
00:31:05,160 --> 00:31:07,760
Speaker 3: What's the what's happening there that you're seeing.

602
00:31:09,480 --> 00:31:13,920
Speaker 4: Well, we got in really early into the Facebook game. Yeah,

603
00:31:13,960 --> 00:31:16,600
Speaker 4: I guess this was like we started advertising in twenty thirteen,

604
00:31:16,640 --> 00:31:19,960
Speaker 4: twenty fourteen, and like, gosh, those were the Hey days, right,

605
00:31:20,000 --> 00:31:23,320
Speaker 4: and we could acquire customers for thirteen dollars, which just

606
00:31:23,480 --> 00:31:25,840
Speaker 4: like for context, I think now it's about two hundred

607
00:31:25,840 --> 00:31:31,320
Speaker 4: and fifty dollars. That's probably understating it. It is massively

608
00:31:31,400 --> 00:31:36,040
Speaker 4: expensive and yet probably still the most effective, right, And

609
00:31:36,120 --> 00:31:39,240
Speaker 4: I think the lack of competition there is a real problem.

610
00:31:39,320 --> 00:31:43,880
Speaker 4: Like we've tried Reddit to mix success, We've tried TikTok

611
00:31:43,920 --> 00:31:44,720
Speaker 4: to mix success.

612
00:31:45,120 --> 00:31:45,240
Speaker 2: You know.

613
00:31:45,400 --> 00:31:48,480
Speaker 3: Actually another quick question, this is something I've wondered about.

614
00:31:48,560 --> 00:31:50,920
Speaker 3: I don't many of the clothes that I buy, Like

615
00:31:51,480 --> 00:31:55,000
Speaker 3: it's because I won't buy through Instagram or even buy online.

616
00:31:55,000 --> 00:31:57,120
Speaker 3: But I'll see something that gets flashed to me on

617
00:31:57,160 --> 00:31:58,800
Speaker 3: Instagram and then I'm like, oh, that's a nice shirt

618
00:31:58,840 --> 00:32:03,480
Speaker 3: or whatever. When Instagram launched it's inside shopping where you

619
00:32:03,520 --> 00:32:05,280
Speaker 3: could launch a store in Instagram, I was like, oh,

620
00:32:05,280 --> 00:32:07,160
Speaker 3: this is a great idea, just like price a button,

621
00:32:07,280 --> 00:32:09,560
Speaker 3: use Apple Pay and then I'll get it. And my

622
00:32:09,680 --> 00:32:12,520
Speaker 3: understanding is hasn't taken off, and that actually there is

623
00:32:12,560 --> 00:32:15,480
Speaker 3: not a lot of in app shopping still in Instagram.

624
00:32:15,480 --> 00:32:17,480
Speaker 3: Do you have any view insight into that.

625
00:32:17,640 --> 00:32:20,040
Speaker 4: We have not had as much success with that, But

626
00:32:20,120 --> 00:32:22,680
Speaker 4: our price points also higher, so I can't really you know,

627
00:32:22,800 --> 00:32:26,480
Speaker 4: I think if you're like buying a nine dollars hairclip,

628
00:32:27,840 --> 00:32:30,600
Speaker 4: I mean, guilty as charge, Like, I think there's more

629
00:32:30,640 --> 00:32:33,200
Speaker 4: success there. I think for something that's sitting at our

630
00:32:33,240 --> 00:32:36,120
Speaker 4: price point, it's still Yeah, I'm not going to see

631
00:32:36,160 --> 00:32:38,480
Speaker 4: instant conversion. Yeah, but it's exactly what you said.

632
00:32:38,680 --> 00:32:41,360
Speaker 2: Your clothing is not an impulse buy for sure. I

633
00:32:41,400 --> 00:32:44,640
Speaker 2: have impulse spot off Instagram and ended up with some

634
00:32:44,880 --> 00:32:45,840
Speaker 2: strange products.

635
00:32:46,320 --> 00:32:50,400
Speaker 4: Gosh, and they need they keep on mounting. Yeah, yeah,

636
00:32:50,680 --> 00:32:54,520
Speaker 4: I guess I will just say. I think, as you know,

637
00:32:54,600 --> 00:32:57,520
Speaker 4: small business owners like we can do everything right, and

638
00:32:57,600 --> 00:33:01,160
Speaker 4: I think a lot of us won't make it. That's

639
00:33:01,200 --> 00:33:02,760
Speaker 4: the truth. A lot of us will be out of

640
00:33:02,800 --> 00:33:06,239
Speaker 4: business within the next six to nine months, and I

641
00:33:06,280 --> 00:33:09,600
Speaker 4: think the consumer doesn't really understand that. I think actually

642
00:33:10,400 --> 00:33:13,080
Speaker 4: even people who are in retail, who are one layer removed.

643
00:33:13,080 --> 00:33:15,520
Speaker 4: Don't understand that. I was chatting with an executive of

644
00:33:15,560 --> 00:33:17,640
Speaker 4: a department store and he was like, well, actually, sales

645
00:33:17,640 --> 00:33:19,840
Speaker 4: have been great because everyone's rushing to get stuff, and like,

646
00:33:19,880 --> 00:33:21,920
Speaker 4: I'm sure people will work it out for the holidays.

647
00:33:21,920 --> 00:33:26,560
Speaker 4: And I don't know if people really understand how dire

648
00:33:26,600 --> 00:33:30,200
Speaker 4: it is, you know, And yes, okay, like Trump's talking

649
00:33:30,200 --> 00:33:32,520
Speaker 4: about you're going to get two stuffed animals instead of

650
00:33:32,560 --> 00:33:36,880
Speaker 4: nineteen stuffed animals. I'm like, you're getting zero. Yeah, so

651
00:33:37,280 --> 00:33:40,840
Speaker 4: my kids have enough. I mean, I know, same thought here.

652
00:33:41,120 --> 00:33:44,200
Speaker 4: But small businesses won't make it. The big businesses will

653
00:33:44,240 --> 00:33:45,920
Speaker 4: be fine, like gosh, iPhones.

654
00:33:47,000 --> 00:33:51,080
Speaker 3: No, it's actually like a really big mass clothing line

655
00:33:51,080 --> 00:33:54,160
Speaker 3: that's not as sort of nice and high quality, like

656
00:33:54,440 --> 00:33:59,600
Speaker 3: when you think about like a slightly cheaper, much larger

657
00:33:59,600 --> 00:34:02,680
Speaker 3: competitive I don't know the names. Maybe the two of

658
00:34:02,720 --> 00:34:05,640
Speaker 3: you can think of a better analog than not than

659
00:34:05,840 --> 00:34:08,520
Speaker 3: J Crew, yeah or something like that, Like what do

660
00:34:08,600 --> 00:34:10,920
Speaker 3: they you know, we just eat some of the costs

661
00:34:10,960 --> 00:34:14,040
Speaker 3: and they have distribute makers that can they have enough

662
00:34:14,080 --> 00:34:16,240
Speaker 3: scale that they can force their producers to eat costs

663
00:34:16,280 --> 00:34:18,120
Speaker 3: and just sort of you know, charge along.

664
00:34:18,840 --> 00:34:21,719
Speaker 4: You know, I think for those retailers that have enough

665
00:34:21,719 --> 00:34:25,279
Speaker 4: cash on the balance sheet. Yeah, maybe it's a risk

666
00:34:25,280 --> 00:34:27,080
Speaker 4: they're willing to take. I think the other thing that's

667
00:34:27,120 --> 00:34:31,680
Speaker 4: not understood necessarily about the tariffs is that you pay

668
00:34:31,800 --> 00:34:34,080
Speaker 4: tariffs to the government basically as soon as the goods

669
00:34:34,160 --> 00:34:37,600
Speaker 4: hit the US territory.

670
00:34:37,680 --> 00:34:40,879
Speaker 2: Right, So there's some sufficial comes and like looks at it.

671
00:34:40,800 --> 00:34:43,399
Speaker 4: And says basically, here's your own voice, pay it up, right,

672
00:34:43,480 --> 00:34:45,440
Speaker 4: and you don't get like your thirty day terms or

673
00:34:45,440 --> 00:34:47,759
Speaker 4: your sixty day terms that your factories extend to you,

674
00:34:48,239 --> 00:34:50,400
Speaker 4: because that's actually the selling window that you need to

675
00:34:50,400 --> 00:34:52,960
Speaker 4: sell your products to your customers. So it's actually a

676
00:34:53,040 --> 00:34:55,480
Speaker 4: huge cash flow problem as well. Yeah, and you're bringing

677
00:34:55,480 --> 00:34:58,320
Speaker 4: in these goods in not knowing actually if your customer

678
00:34:58,440 --> 00:35:02,080
Speaker 4: is willing to eat the price hike. So again it's

679
00:35:02,080 --> 00:35:06,520
Speaker 4: a gamble. Big apparel companies with huge cash lots of

680
00:35:06,560 --> 00:35:07,520
Speaker 4: cash on their bounce sheets.

681
00:35:08,120 --> 00:35:10,560
Speaker 3: Yes, they If you're a seller, if you're a factory

682
00:35:10,640 --> 00:35:14,440
Speaker 3: seller to a small entity in the US, you may

683
00:35:14,480 --> 00:35:18,080
Speaker 3: be reluctant to just let it ship there because you

684
00:35:18,160 --> 00:35:20,160
Speaker 3: actually don't know whether that customer is going to be

685
00:35:20,160 --> 00:35:21,799
Speaker 3: able to take delivery and pay at the very end.

686
00:35:21,960 --> 00:35:24,360
Speaker 4: Yeah, that's I think that's a real consequence. That's a

687
00:35:24,400 --> 00:35:27,279
Speaker 4: real consequence. But I think they're fighting for their survival too.

688
00:35:27,360 --> 00:35:29,640
Speaker 4: You know, they're going to take something rather than nothing.

689
00:35:30,040 --> 00:35:33,440
Speaker 2: Yeah, all right, Sarah Lafleur. It was so good catching up.

690
00:35:33,480 --> 00:35:36,439
Speaker 2: I wish it was under better circumstances, but I'm glad

691
00:35:36,480 --> 00:35:37,160
Speaker 2: we finally did that.

692
00:35:37,320 --> 00:35:39,600
Speaker 4: Thank you. This was this was a blast. Thank you guys,

693
00:35:39,640 --> 00:35:54,760
Speaker 4: Thank you so much. That was fantastic, Joe.

694
00:35:54,760 --> 00:35:57,279
Speaker 2: That was so fascinating, and I am really glad we

695
00:35:57,360 --> 00:35:59,360
Speaker 2: finally had Sarah on. It is kind of the perfect

696
00:35:59,400 --> 00:36:02,920
Speaker 2: moment to talk about the textile clothing business. I hadn't

697
00:36:02,960 --> 00:36:06,440
Speaker 2: thought of the cash flow issue of actually paying the

698
00:36:06,480 --> 00:36:09,719
Speaker 2: customs coming. I mean, obviously I knew that companies have

699
00:36:09,800 --> 00:36:12,960
Speaker 2: to pay the tariffs as things actually come in at

700
00:36:13,000 --> 00:36:17,040
Speaker 2: the ports, but the issue of like the discrepancy between

701
00:36:17,080 --> 00:36:20,160
Speaker 2: your selling window and when you actually have to pay

702
00:36:20,520 --> 00:36:22,920
Speaker 2: that extra tax. I hadn't thought of that.

703
00:36:23,120 --> 00:36:25,680
Speaker 3: No, there's all sorts of I mean, there's all sorts

704
00:36:25,680 --> 00:36:29,920
Speaker 3: of wrinkles. No pun intended that the tariffs are creating.

705
00:36:30,320 --> 00:36:34,399
Speaker 3: I really liked that episode because, look, we could talk

706
00:36:34,440 --> 00:36:38,520
Speaker 3: to economists all day long about shortages coming or higher prices.

707
00:36:39,000 --> 00:36:40,680
Speaker 3: So it's helpful to hear from someone.

708
00:36:40,560 --> 00:36:43,000
Speaker 2: In business actually dealing. Actually, yes, all.

709
00:36:42,880 --> 00:36:46,080
Speaker 3: Those things that economists are talking about are very real.

710
00:36:46,440 --> 00:36:49,319
Speaker 3: You know, so much in there that was interesting, you know,

711
00:36:49,560 --> 00:36:52,120
Speaker 3: starting on that last point that you mentioned, you know, again,

712
00:36:52,320 --> 00:36:56,160
Speaker 3: a big retailer, like a J crew, they're going to

713
00:36:56,200 --> 00:36:59,240
Speaker 3: have an easier time sort of smoothing out their cash flows,

714
00:36:59,280 --> 00:37:02,680
Speaker 3: taking a ri making a bet, ordering a line than

715
00:37:02,719 --> 00:37:05,920
Speaker 3: a company that's just you know, quarter to quarter for

716
00:37:05,960 --> 00:37:06,560
Speaker 3: its survival.

717
00:37:06,840 --> 00:37:09,160
Speaker 2: This seems to be a recurring theme in a lot

718
00:37:09,160 --> 00:37:11,440
Speaker 2: of these tariff episodes, right, so we heard it in

719
00:37:11,520 --> 00:37:15,839
Speaker 2: the gaming industry episode. The smaller players seem like they're

720
00:37:15,840 --> 00:37:19,200
Speaker 2: suffering or will suffer a lot more than the big guys.

721
00:37:19,280 --> 00:37:22,080
Speaker 2: And then when we spoke to the Lentil King of Saskatchewan,

722
00:37:22,160 --> 00:37:25,239
Speaker 2: he seemed, you know, he was kind of sanguine about

723
00:37:25,280 --> 00:37:28,160
Speaker 2: the whole thing. I guess because he's the biggest Lentil

724
00:37:28,200 --> 00:37:29,080
Speaker 2: player out there.

725
00:37:29,600 --> 00:37:32,520
Speaker 3: Yes, And the fact that it sounds like for AG,

726
00:37:32,600 --> 00:37:35,160
Speaker 3: the idea of like small AG has sort of been

727
00:37:35,360 --> 00:37:36,960
Speaker 3: disappearing for a while. I mean, what do you say

728
00:37:37,040 --> 00:37:40,680
Speaker 3: he's at a family farm at this point in Saskatchewan

729
00:37:40,719 --> 00:37:43,960
Speaker 3: means having three hundred thousand acres, which you know is

730
00:37:44,000 --> 00:37:49,520
Speaker 3: not my conception of a little family farm. But then also, obviously,

731
00:37:49,880 --> 00:37:52,839
Speaker 3: I guess I was surprised a little bit that there

732
00:37:53,000 --> 00:37:56,719
Speaker 3: isn't more capacity or market depth in some of these

733
00:37:56,760 --> 00:37:59,640
Speaker 3: non China countries like a Vietnam, like a Philippines, like

734
00:37:59,640 --> 00:38:04,040
Speaker 3: a Kim so forth for the types of sewing and

735
00:38:04,080 --> 00:38:07,359
Speaker 3: cutting that's necessary at this level. And so even at

736
00:38:07,400 --> 00:38:11,040
Speaker 3: this point for something like clothes, and granted Sarah makes

737
00:38:11,320 --> 00:38:14,120
Speaker 3: nice high end clothes, that is sort of still China

738
00:38:14,239 --> 00:38:14,680
Speaker 3: or nowhere.

739
00:38:14,960 --> 00:38:18,480
Speaker 2: Yeah, And I guess this is the other theme that

740
00:38:18,560 --> 00:38:22,239
Speaker 2: keeps coming through that it's just going to be very

741
00:38:22,360 --> 00:38:25,560
Speaker 2: very hard, slash impossible to try to build up that

742
00:38:25,600 --> 00:38:28,840
Speaker 2: capacity and expertise in the US. And there's there's no

743
00:38:28,920 --> 00:38:32,320
Speaker 2: way anyone's going to open, like I don't know, start

744
00:38:32,360 --> 00:38:35,719
Speaker 2: growing mulberry trees and farming silkworms in the next six

745
00:38:35,800 --> 00:38:39,040
Speaker 2: months or something like that. So, yeah, buying your silk

746
00:38:39,120 --> 00:38:43,200
Speaker 2: now for Christmas? Useful bit of advice, Yes, all right, Shall.

747
00:38:43,040 --> 00:38:45,520
Speaker 3: We leave nobody say that there is not useful advice

748
00:38:45,560 --> 00:38:46,120
Speaker 3: on outlock.

749
00:38:46,400 --> 00:38:48,279
Speaker 2: That's right. Shall we leave it there?

750
00:38:48,320 --> 00:38:49,040
Speaker 3: Let's leave it there.

751
00:38:49,200 --> 00:38:51,600
Speaker 2: This has been another episode of the Odd Thoughts podcast.

752
00:38:51,760 --> 00:38:54,680
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.

753
00:38:54,800 --> 00:38:57,960
Speaker 3: And I'm Joe Wisenthal. You can follow me at The Stalwart.

754
00:38:58,280 --> 00:39:02,360
Speaker 3: Follow Sarah Lafleur, She's at sm Lafleur. Follow our producers

755
00:39:02,400 --> 00:39:05,640
Speaker 3: Kerman Rodriguez at Carman armand dash Ol Bennett at Dashbot

756
00:39:05,640 --> 00:39:08,719
Speaker 3: at Kilbrooks at Kilbrooks. For more odd Loots content, go

757
00:39:08,760 --> 00:39:10,920
Speaker 3: to Bloomberg dot com slash odd Lots, where we have

758
00:39:10,960 --> 00:39:14,239
Speaker 3: a daily newsletter and all of our episodes and you

759
00:39:14,280 --> 00:39:16,759
Speaker 3: can You should check out our discord where people are

760
00:39:16,760 --> 00:39:19,759
Speaker 3: talking about these topics twenty four to seven. That's discord

761
00:39:19,800 --> 00:39:21,600
Speaker 3: dot gg slash od Lots.

762
00:39:21,920 --> 00:39:24,520
Speaker 2: And if you enjoy odd Lots, if you like it

763
00:39:24,560 --> 00:39:27,680
Speaker 2: when we talk to actual businesses that are dealing with

764
00:39:27,719 --> 00:39:30,840
Speaker 2: the tariffs right now, then please leave us a positive

765
00:39:30,880 --> 00:39:34,160
Speaker 2: review on your favorite podcast platform. And remember, if you

766
00:39:34,239 --> 00:39:36,759
Speaker 2: are a Bloomberg subscriber, you can listen to all of

767
00:39:36,760 --> 00:39:39,680
Speaker 2: our episodes absolutely ad free. All you need to do

768
00:39:39,760 --> 00:39:42,440
Speaker 2: is find the Bloomberg channel on Apple Podcasts and follow

769
00:39:42,480 --> 00:40:01,640
Speaker 2: the instructions there. Thanks for listening it