sweater report by fbic global retail tech nov 2015

A Deep Dive into Sweaters

• US sweater imports increased by 17.1% in 2014, underscoring a growth trend in imports.

• China maintains its dominant position as the prime location for sweater sourcing, but new knitting equipment purchases point to Vietnam and Bangladesh as growing alternatives.

• New designer names are emerging in the sweater category.

• Innovations in yarns and designs amid a stable commodity environment make us optimistic about the growth potential of the category.

D E B O R AH WE I N SWI G E x e c u t i v e D i r e c t o r – H e a d o f G l o b a l R e t a i l & T e c h n o l o g y F u n g B u s i n e s s I n t e l l i g e n c e C e n t r e d e b o r a h w e i n s w i g @ f u n g 1 9 3 7 . c o m U S : 6 4 6 . 8 3 9 . 7 0 1 7 H K : 8 5 2 . 6 1 1 9 . 1 7 7 9 C H N : 8 6 . 1 8 6 . 1 4 2 0 . 3 0 1 6

Nov. 2015

2 DEBORAH WEINSWIG, EXECUTIVE DIRECTOR–HEAD OF GLOBAL RETAIL & TECHNOLOGY [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2015 The Fung Group. All rights reserved.

TABLE OF CONTENTS EXECUTIVE SUMMARY 3

US SWEATER IMPORTS OVERVIEW 4

EUROPEAN SWEATER IMPORTS OVERVIEW 6

SWEATER BRANDS AND DESIGNERS 10

PRODUCTION: YARNS AND KNITTING 14

CONCLUSION 18

APPENDIX 19

Nov. 2015


EXECUTIVE SUMMARY

In this report, we take a deep dive into the sweater category of knitwear, with a focus on technology and innovation. We begin by analyzing import and production data for the US and European sweater markets. We then take a look at the leading brands and innovators in the category, and then highlight technology trends in sweater production, such as nanotechnology and seamless knitting.

We relied on international trade statistics to gain insights into the sourcing patterns for the US and Europe. Not surprisingly, China is the largest supplier of sweaters in the US. Import data show that in 2014, 88.7% of cotton sweaters in the US were imported from China, as were 90.2% of wool sweaters, 78.9% of man-‐made-‐fiber sweaters and 87.8% of other-‐vegetable-‐fiber sweaters. The data further show that there is increasing demand for cotton sweaters in the US. The category grew by 10.5% in 2013 and by 10.6% in 2014, and it is looking strong in 2015, when it is projected to grow by 4.2%. We expect to see further expansion in the category by the end of this year as winter merchandise sales pick up in the fourth quarter.

China is still the major sourcing country for sweaters in Europe, too. However, Europe’s share of imports is significantly lower than the US’s. Other important sourcing countries for the European market are Turkey, Germany, Italy, Portugal and Romania. These countries offer the benefit of market proximity, production know-‐how and design capabilities. European sweater imports experienced substantial volume growth in 2013 and 2014, but we expect this trend to subside in light of the unfavorable economic environment in the region.

Also in this report, we highlight some of the emerging designer names in the sweater category, such as Angela Belle, Buffy Reid and Kim Haller, and list a select group of fashion houses and brands that set the trends in the sweater market. We list some innovative startups in the sweater market, too, such Knyttan, Appalatch, and Wool and the Gang, and detail their business propositions based on customization, responsible sourcing and the maker movement.

Lastly, from a sourcing perspective, we identify some of the current developments in the production of sweaters, with a particular focus on the innovations we see in yarns and knitting. Demand for functional yarns has picked up, and spinners are experimenting with nontraditional blends and new finishings that enhance yarn performance. Some yarn producers have shifted their production base to China to offer speed to market and lower price points, while others are looking to expand production into Vietnam to benefit from the country’s cost advantage over China.

Nov. 2015


US SWEATER IMPORTS OVERVIEW

US Sweater Imports

According to the American Apparel & Footwear Association, the US imported 97.5% of its apparel consumption between 2012 and 2013; the percentage was slightly higher, at 97.7%, in 2011. By looking at the import data for sweaters, and making the assumption that the imports-‐to-‐consumption ratio is relatively stable across product categories, we are able to get a sense of the volume of sweater consumption in the US.

Figure 1. US Sweater Imports by Volume and Value: 2013–2014

Fabric Type Volume (Doz.) Value (USD Mil.)

2013 2014 % Change 2013 2014 % Change

Cotton

9,821,115 10,860,075 10.6 887.6 957.8 7.9

Wool Men’s & Boys’ 522,240 580,964 11.2 183.2 208.2 13.6

Wool Women’s & Girls’ 1,808,881 2,028,955 12.2 540.0 643.2 19.1

Man-‐Made Fiber Men’s & Boys’ 348,907 494,378 41.7 26.5 36.7 38.5

Man-‐Made Fiber Women’s & Girls’ 5,603,665 7,420,894 32.4 377.5 460.5 22.0

Other

538,769 447,527 (16.9) 65.5 54.2 (17.2)

Total

18,662,057 21,848,625 17.1 2,084.5 2,364.4 13.4

Import data is aggregated based on the following US Department of Commerce Office of Textiles and Apparel import codes: 345, 445, 446, 645, 646 and 845. For source data, please see note in the Appendix.

Source: US Department of Commerce Office of Textiles and Apparel

The import data allow us insight into the direction of the sweater market in the US. Sweater imports experienced significant growth in 2014, outperforming the total apparel market by almost 14%. The strong growth was primarily driven by man-‐made-‐fiber sweaters, but also by cotton and wool sweater imports, which experienced double-‐digit growth. The only category that decreased significantly in 2014, as well as in 2013, is sweaters made from other vegetable-‐fiber yarns. This decrease can be viewed as a correction following the expansion of imports in the same category in 2011 and 2012. Similarly, it seems that during the first half of 2015, man-‐made-‐fabric sweater imports corrected downward following a sharp increase in 2014.

The data show that there is an increasing demand for cotton sweaters. The category grew by 10.5% in 2013 and by 10.6% in 2014, and it is looking strong in 2015, when it is projected to grow by 4.2%. We expect to see further expansion in the 2015 growth rate, as consumers snap up winter merchandise.

Figure 2. US Sweater Imports by Volume: 2010–1H 2015 (%)

Fabric Type 2011 2012 2013 2014 1H 2015

Cotton

(7.2) (5.9) 10.5 10.6 4.2 Wool Men’s & Boys’ 3.0 9.0 (2.9) 11.2 (7.4)

Wool Women’s & Girls’ (3.7) (18.0) 0.4 12.2 (3.7)

Man-‐Made Men’s & Boys’ 10.8 (19.3) (0.3) 41.7 (14.7)

Man-‐Made Women’s & Girls’ 13.9 4.5 0.7 32.4 (18.6) Other 14.1 26.8 (29.1) (16.9) (17.1)

Total

(0.2) (3.2) 4.2 17.1 (6.6)

Total Apparel

(3.6) (0.8) 4.9 3.2


Nov. 2015


Sourcing Countries

Not surprisingly, China is the largest supplier of sweaters in the US. Import data show that in 2014, 88.7% of cotton sweaters in the US were imported from China, as were 90.2% of wool sweaters, 78.9% of man-‐made-‐fiber sweaters and 87.8% of other-‐vegetable-‐fiber sweaters. China’s significance for the sweater market is large when compared to the total apparel market. In 2014, according to the American Apparel & Footwear Association, China accounted for 41.7% of apparel imports into the US. Besides China, other important sourcing countries are Bangladesh, Indonesia and Mexico, and Italy and Ireland accounted for 4.5% of wool sweater imports into the US in 2014. The following graphs detail the share of imports by country for each sweater category:

Figure 3. US Sweater Imports by Country: 2013–2014

Cotton 2013 2014

Wool 2013 2014

Man-‐Made 2013 2014

89.2%

3.4% 1.2% 1.0%

5.2%

88.7%

3.5% 1.6% 0.3%

5.9%

China

Bangladesh

Indonesia

Mexico

Others

90.3%

3.7% 0.7%

0.6% 4.6%

90.2%

3.9% 0.6% 0.7% 4.7%

China

Italy

Ireland

Peru

Others

78.4%

9.0%

1.9% 2.2%

8.5%

78.9%

8.3%

1.6% 2.0%

9.2%

China

Bangladesh

Indonesia

Mexico

Others

Nov. 2015


Other 2013 2014


EUROPEAN SWEATER IMPORTS OVERVIEW

Sweater Imports and Consumption

To gain an understanding of the European sweater market, we looked at the import, export and production statistics published by Eurostat. By subtracting exports from the sum of imports and production, we derived the total quantity and value of sweaters consumed in the 28 member states of the European Union (EU). It is important to note that the data we use in our analysis of the trade and consumption patterns in Europe is different from that used in our analysis of the US sweater import patterns. In Europe, we rely on PRODCOM data which includes items such as “vests, other than sweaters” and “knit to shape” items. This is an important distinction, because it explains the significant divergence in volume and value figures between the two datasets.

In terms of sourcing for the sweater market, the countries in the EU import 93.5% of their consumption and consume 52.5% of all European sweater production.

In 2014, the apparent consumption of sweaters in the EU, based on import and export prices, was €11.8 billion.

Figure 4. EU Sweater Consumption by Value: 2014

Fabric Type Value (€ Mil.)

Export Import Production Consumption

Wool Men’s & Boys’ 236.71 325.52 511.62 600.43

Women’s & Girls’ 332.98 684.27 836.70 1,188.00

Lightweight Knits 68.70 57.03 313.59 301.92

Cotton Men’s & Boys’ 25.41 114.19 174.56 263.34

Women’s & Girls’ 23.82 82.47 153.75 212.40

Lightweight Knits 229.72 1,565.87 164.21 1,500.36

Man-‐Made Men’s & Boys’ 332.84 2,291.56 540.80 2,499.52

Women’s & Girls’ 88.64 745.53 109.95 766.83

Lightweight Knits 516.18 3,679.58 550.00 3,713.40

Other 143.87 205.42 731.31 792.86

Total

1,999 9,751 4,086 11,839

Source: Eurostat

92.8%

5.3% 0.1% 0.3% 1.5%

87.8%

7.4% 1.6% 1.6% 1.6%

China

Bangladesh

Indonesia

Portugal

Others

Nov. 2015


Figure 5. EU Sweater Consumption by Quantity: 2014

Fabric Type Quantity (000 Pieces)

Export Import Production Consumption

Wool Men’s & Boys’ 4,590 30,060 25,030 50,499

Women’s & Girls’ 6,517 40,215 35,523 69,221

Lightweight Knits 883 4,758 15,487 19,362

Cotton Men’s & Boys’ 2,484 33,628 11,156 42,300

Women’s & Girls’ 2,108 20,391 13,810 32,093

Lightweight Knits 14,336 247,810 13,037 246,511

Man-‐Made Men’s & Boys’ 25,580 433,479 43,226 451,125

Women’s & Girls’ 7,285 158,551 6,859 158,125

Lightweight Knits 42,297 723,234 42,000 722,937

Other 3,721 51,621 25,000 72,900

Total

109,802 1,743,747 231,129 1,865,074

For information on the source data, please see the Appendix. Source: Eurostat

The European market for sweaters experienced a significant slowdown between 2010 and 2012, reflecting a period of economic instability in the region. The market picked up in 2013, when it grew by 9.6% in terms of volume consumption, and in 2014, when it grew by 9.0%, mostly driven by the cotton and man-‐made-‐fiber subsegments. We see a healthy trend in increasing volumes, but volumes do not necessarily mean increased sales figures for brands and retailers, due to two main factors. First, the demand shift to man-‐made fabrics and cotton means that products are selling at lower price points. Second, the depreciation of the euro is affecting the import and export value figures, making it hard to judge the retail effect of the increase in volume consumption.

Figure 6. EU Sweater Consumption by Volume: 2010–2014

Fabric Type 2010 2011 2012 2013 2014

Wool Men’s & Boys’ (4.4) (17.7) (8.6) (4.1) (18.1)

Women’s & Girls’ 2.9 (3.6) (22.0) 0.6 (1.6)

Lightweight Knits 4.4 5.6 (35.4) (7.7) (2.9)

Cotton Men’s & Boys’ (3.0) (6.4) (23.1) (6.9) 10.6

Women’s & Girls’ 1.3 (1.4) (8.5) 3.7 6.8

Lightweight Knits (0.4) (11.3) (15.0) 11.9 (0.9)

Man-‐Made Men’s & Boys’ (11.1) 29.0 (7.4) 12.4 4.1

Women’s & Girls’ 1.8 12.4 (19.2) 14.9 23.6

Lightweight Knits 2.1 6.7 (14.2) 13.8 15.1

Other 24.3 (5.3) 2.4 14.1 37.6

Total

1.4 (0.5) (15.3) 9.6 9.0

For information on the source data, please see the Appendix. Source: Eurostat

Nov. 2015


Sourcing Countries

The European market is more diversified than the US market in terms of sourcing countries for sweaters. Even though China is still the leading destination for production in all categories except sweaters made of other fine animal hair, its share of the market in Europe is significantly lower than in the US. In Europe, important production countries are Turkey, Germany, Italy, Portugal and Romania (which is included in the “others” category), due to their proximity to the market. Looking at year-‐over-‐year changes in the share of imports from every production country, the following points are evident:

• The sourcing landscape in the cotton segment is stable.

• The landscape in wool is shifting to more imports from China at the expense of Italy.

• The man-‐made fabrics segment is shifting to more imports from Italy at the expense of China and Bangladesh.

• The cashmere segment is shifting to more imports from Italy at the expense of China.

• Other fine animal hair imports are shifting to more imports from Italy at the expense of China and Turkey.

• The category of sweaters produced from other materials is shifting to significantly more imports from China.

The following figure details the share of imports by country for each sweater category:

Figure 7. EU Sweater Imports by Country: 2013–2014

Cotton 2013 2014

Wool 2013 2014

25.7%

22.1%

7.4% 6.1%

38.7% 25.4%

20.8%

7.3% 6.6%

40.0% China

Bangladesh

Turkey

Germany

Others

33.8%

12.9% 5.0% 3.9%

44.4% 36.4%

9.9% 5.5%

5.4%

42.8% China

Italy

Bangladesh

Germany

Others

Nov. 2015


Man-‐Made 2013 2014

Cashmere 2013 2014

Other Fine Animal Hair 2013 2014

Other 2013 2014

Source: Eurostat

37.6%

17.2% 2.0%

5.8%

37.3% 33.0%

15.0% 14.3%

5.2%

32.6% China

Bangladesh

Italy

Germany

Others

39.3%

17.3% 9.2%

1.9%

32.3% 35.6%

21.5%

7.9%

4.6%

30.4%

China

Italy

Madagascar

Portugal

Others

22.8%

8.6%

31.8%

7.4%

29.4% 17.4%

17.1%

16.4% 7.4%

41.7% Turkey

Italy

China

Bangladesh

Others

49.3%

8.0% 0.9%

6.2%

35.6% 63.7%

6.1%

3.5%

3.3%

23.4% China

Bangladesh

Hong Kong

Turkey

Others

Nov. 2015


SWEATER BRANDS AND DESIGNERS

The following section lists the main players in the sweater market globally. We identified the trendsetters when it comes to design, and compiled a list of major brands active in markets across North America, Europe and Japan. We further highlight some of the up-‐and-‐coming designers and labels in the category and list the companies that are bringing innovation to the production and distribution of knitwear.

Trendsetters

We interviewed designers from Fenix Fashion and Brilliant to understand which brands dictate the trends in sweaters year in and year out. The brands with the largest influence were Chanel, Prada, Marni, Céline and Stella McCartney.

Sweater Brand Universe

The following list of the main brands active in the sweater category in the US, Japan and the major European markets excludes the trendsetters and up-‐and-‐coming brands. Our goal with this list is to provide an understanding of the segmentation of the various geographic markets, as well as a source of reference and inspiration when it comes to new sweater ideas and designs.

Figure 8. Sweater Brand Landscape

Brand Specialization Category Segment Origin

Club Monaco Multicategory Menswear and Womenswear Affordable Canada/US

Sonia Rykiel Multicategory Womenswear Luxury France

Jil Sander Multicategory Menswear and Womenswear Luxury France

Loro Piana Specialized Menswear and Womenswear Luxury Italy

Max Mara Multicategory Womenswear Luxury Italy

Missoni Specialized Womenswear Luxury Italy

Malo Specialized Menswear and Womenswear Affordable Italy

Ballantyne Specialized Menswear and Womenswear Affordable/Luxury Italy Sacai Multicategory Menswear and Womenswear Luxury Japan

Acne Studios Multicategory Menswear and Womenswear Luxury Sweden

COS Multicategory Menswear and Womenswear Affordable Sweden

Glenbrae Specialized Menswear and Womenswear Affordable UK

John Smedley Multicategory Menswear and Womenswear Affordable UK

Black Sheep Specialized Menswear and Womenswear Affordable UK

Nov. 2015


Brand Specialization Category Segment Origin

Hackett Multicategory Menswear Affordable UK

Hawick Knitwear Specialized Menswear and Womenswear Affordable UK

Alice by Temperley Multicategory Womenswear Luxury UK

Pringle of Scotland Specialized Menswear and Womenswear Luxury UK

Pure Collection Specialized Womenswear Affordable UK

Sofia Cashmere Specialized Womenswear Luxury US

Autumn Cashmere Specialized Menswear and Womenswear Affordable US

The Row Multicategory Womenswear Luxury US

J.Crew Multicategory Menswear and Womenswear Affordable US

Garnet Hill Cashmere Specialized Womenswear Affordable US

Lands’ End Multicategory Womenswear Affordable US

Charter Club/Macy’s Multicategory Womenswear Affordable US

Jed Specialized Womenswear Luxury US

Vince Multicategory Menswear and Womenswear Affordable/Luxury US

White + Warren Specialized Womenswear Affordable/Luxury US

Affordable includes the midmarket and mass-‐market segments, with an average retail price below $200. Luxury includes the premium and luxury segments, with an average retail price above $200.

Source: Company websites/FBIC Global Retail & Technology

Up-‐and-‐Coming Brands and Designers

Many new names have emerged in the knitwear category. Some of the ones we have identified are Angela Belle (which launched the Queene and Belle brand), Buffy Reid with &Daughter, Kim Haller, Ken OE from Coohem, and Sandra Backlund.

Source: &Daughter Source: Queene and Belle

Nov. 2015


Source: Coohem Source: Kim Haller

Source: Alps & Meters

Alps & Meters is a US-‐based performance knitwear brand that was established in 2014. The company sells products such as ski sweaters, which are made with Teflon-‐coated, water-‐resistant wool.

Nov. 2015


Source: Jude

Innovators

Customized Knitwear Knyttan is a London-‐based company, founded in 2013, that produces custom-‐made knitwear by leveraging a digital customization platform. The company involves the customer in the design process by allowing her to create a unique sweater design online, which is then knitted by the company. This brings the minimum order production quantity to one.

Customized Knitwear/Responsible Sourcing Appalatch is a mission-‐driven company that creates made-‐to-‐order knitwear by combining customization technology and local, “Made in the USA” manufacturing.

Responsible Sourcing Zady, a US online retailer founded in 2013, has been very successful in marketing its “Made in the USA” wool sweaters; both raw materials and production are sourced in the US. The product received wide acclaim, including coverage in The Wall Street Journal, and is currently sold out on the company’s online store.

Jude is an Australian knitwear label, which uses local merino to create a range of high-‐quality Australian designer knitwear. All Jude products are available online at the Jude e-‐boutique. The range includes fashion-‐focused knitwear for women, men, baby and home.

Nov. 2015


Maker Movement/Crowdsourcing/Responsible Sourcing Wool and the Gang is an online platform for bespoke knitwear production and a community of knitwear makers. Wool and the Gang allows customers to order bespoke sweaters, which are then knitted by makers who are part of the community. The company relies on responsible sourcing and the strong community appeal of knitting. Wool and the Gang helps makers who are part of its community organize knitting parties, and it supplies knitters with do-‐it-‐yourself (DIY) knitting kits.

Thematic Knitwear Tipsy Elves is an online store that sells ugly Christmas sweaters. The ugly sweater trend has really picked up in recent years, with major retailers and celebrities getting on board. Bloomberg reports that in 2014, Walmart, Target, and Forever 21 were all selling their own versions of ugly Christmas sweaters, while DIY ugly sweater kits became a big hit at other retailers. According to Bloomberg, Michael Gerald, which produces DIY sweater kits, sold 35,000 pieces in 2013 and projected it would sell 400,000 in 2014.

PRODUCTION: YARNS AND KNITTING

Yarn

Yarn Supply and Equipment The market for cotton yarns in China was soft in 2014 and the trend is expected to continue in the short term, as commodity prices are expected to stay low. In addition, there seems to be an oversupply of capacity in the China spinning industry, which inhibits investment in new equipment.

According to data from the International Textile Manufacturers Federation, shipments of new short-‐staple spindles fell by 15% globally in 2014, compared to an increase of 10% in 2013. Shipments of spindles in China, which is the biggest market for spindles, dropped by 29%, and shipments across Asia, which makes up 91% of the market, dropped by nearly 17% year over year. In contrast, long-‐staple (wool) spindle shipments increased by 70% from 2013 to 2014. The majority of shipments were made to Europe, where Turkey, Belarus and Italy saw the largest portions of new long-‐staple spinning capacity.

Against a backdrop of slowing investment in equipment, some suppliers of yarn in Asia have acted to diversify their production base. One of the largest yarn producers in China, the Texhong Textile Group, is planning to expand its presence in Vietnam by opening new yarn production facilities there. The company is looking to take advantage of Vietnam’s cost advantage over China and the favorable effects of the Trans-‐Pacific Strategic Economic Partnership Agreement (TPP). Reverse strategies have also emerged. Italian companies Loro Festa and Filpucci, for example, source raw materials from China and have spinning mills using Italian technology in China. In this way, they claim to offer garment manufacturers in China faster delivery of European-‐quality yarns at lower price points.

Matching Supply with Demand In order to create more opportunities for spinners, nonprofit entities and industry organizations have stepped up their efforts to expand the segment. Woolmark is offering an online matchmaking solution that makes it easy for buyers to find suppliers of yarn, fabric, knits and garments. In Bangladesh, a country that is seeing increasing investment in automated knitting facilities, the Bangladesh Knitwear Manufacturers and Exporters Association published a buyers’ guide in 2014 that aims to help local manufacturers along the value chain tap into a global buyer base. These services have the potential to accelerate the speed of innovation in the knitwear category.

Nov. 2015


Yarn Innovation Spinners and knitters have been active in innovating with new yarn blends, colors, textures and performance properties for the knitwear segment to counter the effects of lower commodity price points. One example is Loro Festa, which produces a nanocashmere yarn for sweaters to make them water and stain repellent.

Applying nanotechnology is one way to innovate with the production of yarn, and various nanotechnologies can be applied at different stages of the knitwear production process:

Figure 9. Nanotechnologies in Knitwear Production

Source: ObservatoryNANO

Treating yarn with nanotechnological processes can enhance its properties and those of the final product. Examples include creating knitwear that is wrinkle resistant, stain repellent, printable or antibacterial. However, the use of nanotechnology in the production of yarn can also lead to brand new blends that can be used to produce high-‐performance and multifunctional textiles, such as electroconductive, smart textiles.

Another way to innovate with the production of yarn is to create new blends with nontraditional materials, such as Kevlar and steel, which can be used in the production of ultrastrong, protective apparel or metallic yarns. An added benefit to this approach is lower import duty rates. For example, products made of yarn with a significant percentage of steel can be imported at a duty rate of 6% in the US versus 16% for garments made from wool yarn alone. Below, we list a selection of innovative, functional yarns in the market along with some that have been developed by research institutions:

KINTWEAR PIPELINE

Electrospinning

Plasma Treatments, Grafting, Coating, etc.

Nanoparticles, Nanocomposites MATERIALS

SPINNING

FINISHING

FINISHING

PRODUCTS

NANOTECHNOLOGIES

Nov. 2015


Figure 10. Functional Yarns

Name Description Select Yarn Suppliers

Available on the Market

Naturetexx Plasma

Plasma delivers fibers with the same strength and the same or better pilling performance as conventionally processed yarns, along with improved ability to absorb moisture. It is an alternative to the current industry standard superwash, chlorine-‐hercosett process. The process allows various finishings that make yarns water repellant, or offer antimosquito, antimicrobial or UV-‐protection properties.

Südwolle Group

COOLMAX

COOLMAX fabric includes an effective, fiber-‐based moisture management system. The system can move perspiration away from the body, and through the fabric, where it can evaporate quickly, allowing the wearer to feel cooler and more comfortable.

Novetex Textiles

H2DRY

The H2DRY process gives wool new performance, making it elastic, easy to care for, anticreasing and breathable. It also keeps the skin dry, as dampness is wicked away to the surface of the knit.

Zegna Baruffa Lane Borgosesia

Re.Verso

Produced in Italy, Re.Verso fabric is a multistep collaboration between three mills: Green Line, Nuova Fratelli Boretti and Lanificio Stelloni. The companies are working together to create a supply chain for fashion, specializing in Italian-‐made, sustainable fabrics. The raw material to be recycled is sourced from all over Italy, as well as a few other European countries, courtesy of Green Line.

Filpucci

Lycra HYBRID

Invista, owner of the Lycra brand, launched a patent-‐pending technology for knitted denim fabrics. The fabrics are said to combine the best of both worlds—the comfort and flexibility of a knit with the authentic aesthetics and performance of a woven, under the platform of Lycra HYBRID technology.

Invista

EcoFRESH Yarn An optimized dyeing technique that uses no salt or alkali endows EcoFRESH Yarn with advantages in fast delivery, energy conservation and green production.

BROS Eastern

Outlast (Matrix Infusion Coating)

Outlast Thermocules are finely printed onto flat fabric. Outlast MIC is intended for products worn next to skin and is perfect for the active, casual and sportswear markets. The process leaves the garment durable through multiple washes and the hand feel is unchanged.

Novetex Textiles

AFC Night Glowing Yarn

Night Glowing Yarn is a luminous yarn that automatically glows in the dark after absorbing light for 10 minutes. The absorbing-‐storing-‐emitting process can be repeated indefinitely.

Asiatic Fiber

Color-‐Changing Yarn Thermochromic yarn changes its color with the rise and decline of the temperature. This kind of color variation uses the difference of temperature to control the change of color.

Yarns and Colors

Source: Company Websites

Nov. 2015


Figure 11. Conceptual Yarns

Name Description Research Entity

Conceptual Yarns

Wool-‐Kevlar Fabric made of a blend of wool and Kevlar with 28–30 layers provides the same level of bullet resistance as 36 layers of Kevlar alone.

RMIT University, Australia

Smart Yarn

This carbon nanotube-‐coated smart yarn that conducts electricity could be woven into soft fabrics. The smart yarn process involves dipping cotton yarn into a solution of carbon nanotubes in water and then into a solution of a special sticky polymer in ethanol.

University of Michigan

Knitwear Production

Flatbed Knitting Equipment

Equipment Shipment Trends

According to data from the International Textile Manufacturers Federation, global shipments of electronic flat knitting machines, the ones used in fully fashioned sweater production, were up by 31% in 2014. This was the first year-‐over-‐year increase since 2011. Of these shipments, 85% went to Asia, out of which 42% were shipped to China. Bangladesh and Vietnam rank second and third to China in terms of numbers of flat knitting machines in the country.

Japanese company Shima Seiki is one of the two leading producers of flatbed knitting machines (the other is Stoll). For fiscal year 2015, Shima Seiki recorded impressive revenues based on substantial growth in shipments. According to the company’s annual report, it received orders worth ¥39,628 million in 2015 versus orders worth ¥38,477million in 2014. Its sales for the year increased by 16.2%.

In terms of the geographic distribution of its knitting machine business, Shima Seiki reported that Bangladesh expanded at an astonishing pace over the past two years, with unit sales doubling year over year. The country is becoming a fast-‐fashion production base for European and US apparel and knitwear producers, which are investing heavily in equipment. Apart from Bangladesh, Shima Seiki reported that Vietnam, Cambodia, Thailand and other ASEAN countries are performing well, amid an accelerating shift in production away from China, mainly among major knitwear manufacturers in Hong Kong.

Production Innovation

There is increasing evidence that knitwear production is headed to full automation, with the potential of customizable garments in the long term. Stoll and Shima Seiki have both introduced seamless flat knitting machines. Yet the technology seems to still be in the development stage, having certain limitations in the operating process and final product.

Shima Seiki’s WHOLEGARMENT and Stoll’s KNIT & WEAR knitting machines take away the need for skilled linking labor in sweater production by knitting fully finished, seamless garments. These high-‐end machines have already been introduced in developed markets, which typically aim for higher-‐end products. Shima Seiki is launching its new WHOLEGARMENT model, the MACH2XS, in November 2015 at the ITMA conference in Milan, positioning it as a strategic machine linked to design systems to strengthen production for local-‐market proposals. The company is anticipating sales to increase by 7.7% in the coming year.

Seamless Sweater Source: Stoll

Nov. 2015


In its July 2015 newsletter, the Knitwear Innovation and Design Society of Hong Kong published details regarding the operation of the Inoue WHOLEGARMENT factory:

With 75 WHOLEGARMENT machines, 60 employees (one assistant overseeing 10–12 machines) and outsourced washing and pressing facilities in accordance with local water restrictions, the Inoue factory has a production capacity of 240,000 units annually—with a repeat order rate of 1,000 units per 4–7 days (dependent on garment complexity). One highlight of the factory’s product range is an inlay-‐stitch blazer, which looks and feels like a cut-‐and-‐sewn woven, complete with faux seams. The piece takes only 80 minutes to make.

Seamless knitting does have limitations, however. For example, technicians must have an entirely unique skillset in programming, which takes anywhere from 18 months to two years of training to master, while designers need an unprecedented level of technical comprehension to handle working with the system. In addition, when speaking directly with experts, we learned that seamless garments are also limited in some aspects of fit and design, which makes their large-‐scale production nonviable at present.

CONCLUSION

This report presents an overview of the sweater category, including the import patterns for sweaters in the US and the EU, the main sweater brands and designers in these markets, and current trends in the supply chain for sweaters. Most notably, we identified that, although China has been the main production location for sweaters, especially those made out of cotton and man-‐made fibers, Bangladesh and Vietnam are becoming bigger players, as evidenced by a boom in investment in knitting equipment in those countries. Lastly, we think the long-‐term future of the category lies in seamless knitting and innovative yarns, both of which will enhance garment properties.

Nov. 2015


APPENDIX

Depending on the way it is produced, a sweater can be one of three types: cut and sewn, fully fashioned or seamless.

Cut and Sewn

Cut-‐and-‐sewn sweaters are created by cutting knitted sweater fabric and sewing the pieces together. This type of production is the most labor intensive, as it requires separately knitted trimmings and pockets to be stitched onto the garment. Shima Seiki, which produces computerized knitting machines, makes the argument that with cut-‐and-‐sew production up to 40% of the original fabric can be wasted. At the same time, cut and sew production takes away the need for specialized linking labor, which can bring down the cost of production significantly if fabric usage is optimized.

Fully Fashioned

Fully fashioned sweaters rely on a manufacturing process that is more automated than cut-‐and-‐sew production, and that allows the separate creation of shaped front and back body parts and sleeve parts. This is achieved by programmable automated flatbed knitting machines, which increase or decrease the number of knitted loops as the different parts are produced, thus eliminating the cutting operation. During the knitting process, all parts of the garment are knitted separately. This means that fully fashioned knitting still requires that the pieces are linked together through a manual linking process. The linking process requires precision and a sensitive touch, and is usually performed by young women with nimble fingers and good eyesight.

Because fully fashioned sweater production relies on computerized knitting machines, it also requires skilled technicians who can translate designs into programmable patterns. In addition, when using a knitting machine, operators must arrange and place the knitting yarn on the spindles carefully, so that the machine picks up the right thread at the right time, per the programmed design. This makes knitting a sweater a long and complicated task, with some designs taking over six hours to program and over 100 minutes to knit.

Seamless

Seamless garment knitting, introduced in 1995, is an innovation that allows a complete garment to be created with minimal or no cutting and sewing. The seamless production technology takes away the need for manual labor and minimizes cutting waste, achieving higher productivity. Today, seamless flatbed knitting machines are used to produce customized high-‐end sweaters, and many in the industry see them as the future of knitwear manufacturing.

As one might suspect, the most widely used sweater production technique is fully fashioned manufacturing. This makes a sweater a more complex garment to make than other traditional garments, as its production requires both skilled technicians and skilled linking personnel, who are increasingly more difficult to find in developing markets.

Apart from the technology used to put the garment together, sweaters vary based on the materials they are made from. The basic distinction is between organic-‐fiber yarns, such as cotton, wool and cashmere, and man-‐made-‐fiber yarns. The material cost or yarn cost typically contributes the largest portion of the overall garment cost (usually between 50% and 70%, and even higher for high-‐end designs). Therefore, it is important to understand the dynamics of the raw materials and yarn markets, as well as the end market for sweaters.

Nov. 2015


Note on Source Data for Imports

US Data For US sweater imports, we aggregate data released by the US Department of Commerce Office of Textiles and Apparel based on import codes 345, 445, 446, 645, 646 and 845. The corresponding HTS codes prior to 2015 are listed in the table below. The products that are included under the import codes listed above are categorized as “sweaters”, but exclude items such as “vests, other than sweater vests” and “other knit to shape articles”. If these items were included in our analysis, this would change the volume and value import figures for the US significantly.

HTS Code Description

HTS Code Description 345

645

6103.22.0070 M/B ENSEMBLES OF SWEATERS OF COTTON, KNIT 6103.23.0070 M/B ENS OF SWEATERS OF OTHER SYN FIBERS, KNIT

6103.29.2058 M/B ENS SWEATERS OF OT TEX MAT SUBJ COT RES, KNIT 6103.29.1040 M/B ENS OF SWEATERS OF ARTIFICIAL FIBERS, KNIT

6104.22.0080 W/G ENSEMBLES OF SWEATERS OF COTTON, KNIT 6103.29.2062 M/B ENS SWEATERS OF OT TEX MAT SUBJ MMF RES, KNIT

6104.29.2065 W/G ENS SWEATER OT TEXTILE MAT SUBJ COT RES, KNIT 6110.30.1010 M/B SWEATERS OF MMF CONT 25% MORE LEATHER, KNIT

6110.20.1010 MEN'S/BOYS' SWEATERS OF COTTN, GE 36% FLAX FB KNIT 6110.30.2010 M/B SWEATERS OF MANMADE FIBERS CONT 30% SILK, KNIT

6110.20.1020 W/G SWEATERS OF COTTON,>=36% FLAX FIBERS, KNIT 6110.30.3010 MEN'S SWEATERS OF OTHER MANMADE FIBERS, KNIT

6110.20.2010 MEN'S SWEATERS OF OTHER COTTON, KNIT 6110.30.3015 BOY'S SWEATERS OF OTHER MANMADE FIBERS, KNIT

6110.20.2015 BOYS' SWEATERS OF OTHER COTTON, KNIT 6110.90.9014 M/B SWEATERS OF OTH TEXTILE MAT SUBJ MMF RES, KNIT

6110.20.2020 WOMEN'S SWEATERS OF OTHER COTTON, KNIT

6110.20.2025 GIRLS' SWEATERS OF OTHER COTTON, KNIT

6110.90.9010 M/B SWEATERS OF OTH TEXTILE MAT SUBJ COT RES, KNIT

6110.90.9026 W/G SWEATERS OF OTH TEXTILE MAT SUBJ COT RES, KNIT

6117.90.9003 PARTS OF SWEATERS OF COTTON, KNIT

445 646 6103.23.0030 M/B ENS OF SWEATERS OF SYN FIB 23% MORE WOOL, KNIT 6104.23.0040 W/G ENS OF SWEATERS OF OT SYNTHETIC FIBERS, KNIT

6103.29.0560 M/B ENSEMBLES OF SWEATERS OF WOOL, KNIT 6104.29.1060 W/G ENS OF SWEATERS OF ARTIFICIAL FIBERS, KNIT

6103.29.2060 M/B ENS SWEATERS OF OT TEX MAT SUBJ WOOL RES, KNIT 6104.29.2069 W/G ENS SWEATER OT TEXTILE MAT SUBJ MMF RES, KNIT

6110.11.0015 MEN'S SWEATERS OF WOOL, KNIT 6110.30.1020 W/G SWEATERS OF MMF CONT 25% MORE LEATHER, KNIT

6110.11.0025 BOYS' SWEATERS WOOL, KNIT OR CROCHETED 6110.30.2020 W/G SWEATERS OF MANMADE FIBERS CONT 30% SILK, KNIT

6110.12.1010 M/B SWEATERS WHOLLY OF CASHMERE, KNIT 6110.30.3020 WOMEN'S SWEATERS OF OTHER MANMADE FIBERS, KNIT

6110.12.1030 M/B VESTS (EXC SWTR VEST) WHOLLY OF CASHMERE, KNIT 6110.30.3025 GIRLS' SWEATERS OF OTHER MANMADE FIBERS, KNIT

6110.12.1050 M/B SWEATSHIRTS ETC, WHOLLY OF CASHMERE, KNIT 6110.90.9030 W/G SWEATERS OF OTH TEXTILE MAT SUBJ MMF RES, KNIT

6110.12.2010 MEN SWEATERS, CASHMERE NESOI, KNIT 6117.90.9010 PARTS OF SWEATERS OF MANMADE FIBERS, KNIT

6110.12.2020 BOYS' SWEATERS OF CASHMERE NESOI, KNIT

6110.19.0015 MEN'S SWEATERS OF FINE ANIMAL HAIR, KNIT, NESOI

6110.19.0025 BOYS' SWEATERS OF FINE ANIMAL HAIR, KNIT, NESOI

6110.30.1510 M/B SWEATERS OF MANMADE FIB CONT 23% WOOL, KNIT

6110.90.9012 M/B SWEATERS OF OTH TEXTILE MAT SUBJ WOOL RES,KNIT

446 845 6104.23.0022 W/G ENS SWEATERS OF SYN FIB 23% MORE WOOL, KNIT 6103.29.2070 M/B ENS OF SWEATER OF OT TEX MATL ASSM H.K., KNIT

6104.29.0570 W/G ENSEMBLES OF SWEATERS OF WOOL, KNIT 6103.29.2074 M/B ENS OF SWEATERS OF OT TEXTILE MATERIALS, KNIT

6104.29.2067 W/G ENS SWEATER OT TEXTILE MAT SUBJ WOOL RES, KNIT 6104.29.2077 W/G ENS SWEATERS OF OT TEXT MATL ASSM H.K., KNIT

6110.11.0030 WOMEN'S SWEATERS OF WOOL, KNIT 6104.29.2079 W/G ENS SWEATER OT TEXTILE MATERIALS NESOI, KNIT

6110.11.0040 GIRLS' SWEATERS OF WOOL, KNIT 6110.90.9022 M/B SWEATERS OF OTH TEX MAT, ASSM HONG KONG, KNIT

6110.12.1020 W/G SWEATERS WHOLLY OF CASHMERE, KNIT 6110.90.9023 MEN OR BOYS SWEATERS,TEX FBR (845), KNIT OR CROCHD

6110.12.1040 W/G VESTS (EXC SWTR VEST) WHOLLY OF CASHMERE, KNIT 6110.90.9024 M/B SWEATERS OF OTHER TEXTILE MATERIAL, KNIT

6110.12.1060 W/G SWEATSHIRTS ETC WHOLLY OF CASHMERE, KNIT 6110.90.9040 W/G SWEATER OF OTH TEX MAT,ASSM IN HONG KONG, KNIT

6110.12.2030 WOMEN'S SWEATERS OF CASHMERE, NESOI, KNIT 6110.90.9041 WOMEN/GIRLS SWEATER,OTH TX FBR(845),KNIT OR CROCHD

6110.12.2040 GIRLS' SWEATERS OF CASHMERE, NESOI, KNIT 6110.90.9042 W/G SWEATERS OF OTHER TEXTILE MATERIAL, KNIT

6110.19.0030 WOMEN'S SWEATERS OF FINE ANIMAL HAIR, KNIT, NESOI 6117.90.9015 PARTS OF SWEATERS OF TEXTILE FIBERS, NESOI, KNIT

6110.19.0040 GIRLS' SWEATERS OF FINE ANIMAL HAIR, KNIT, NESOI

6110.30.1520 W/G SWEATERS OF MANMADE FIBERS CONT 23% WOOL, KNIT

6110.90.9028 W/G SWEATERS OF OTH TEXTILE MAT SUBJ WOOL RES,KNIT

6117.90.9005 PARTS OF SWEATERS OF WOOL, KNIT

Source: Office of Textile and Apparel for US

Nov. 2015


European Data

We rely on Eurostat for data on the imports, exports, and production of sweaters in the member states of the European Union (EU-‐28). The data is categorized based on the PRODCOM list of products. Unlike, data we use in the US, the PRODCOM categories in Europe include items such as “vests, other than sweaters” and “knit to shape” items, which is an important distinction from the data we use in the US. This distinction explains the difference in the volume and value figures between the US and European datasets.

Code Description

14391031 Men's or boys' jerseys, pullovers, sweatshirts, waistcoats and cardigans, of wool or fine animal hair (excluding jerseys and pullovers containing <=50% of wool and weighing <=600g)

14391032 Women's or girls' jerseys, pullovers, sweatshirts, waistcoats and cardigans, of wool or fine animal hair (excluding jerseys and pullovers containing <=50% of wool and weighing <=600g)

14391033 Jerseys and pullovers, containing <= 50% by weight of wool and weighing <= 600 g per article

14391053 Lightweight fine knit roll, polo or turtle neck jumpers and pullovers, of cotton

14391055 Lightweight fine knit roll, polo or turtle neck jumpers and pullovers, of man-‐made fibres

14391061 Men's or boys' jerseys, pullovers, sweatshirts, waistcoats and cardigans, of cotton (excluding lightweight fine knit roll, polo or turtle neck jumpers and pullovers)

14391062 Women's or girls' jerseys, pullovers, sweatshirts, waistcoats and cardigans, of cotton (excluding lightweight fine knit roll, polo or turtle neck jumpers and pullovers)

14391071 Men's or boys' jerseys, pullovers, sweatshirts, waistcoats and cardigans, of man-‐made fibres (excluding lightweight fine knit roll, polo or turtle neck jumpers and pullovers)

14391072 Women's or girls' jerseys, pullovers, sweatshirts, waistcoats and cardigans, of man-‐made fibres (excluding lightweight fine knit roll, polo or turtle neck jumpers and pullovers)

14391090 Jerseys, pullovers, sweatshirts, waistcoats and cardigans, of textile materials (excluding those of wool or fine animal hair, cotton, man-‐made fibres)

Source: Eurostat

Nov. 2015


Deborah Weinswig, CPA Executive Director—Head of Global Retail & Technology Fung Business Intelligence Centre New York: 917.655.6790 Hong Kong: +852 6119 1779 [email protected] Filippo Battaini [email protected]

Marie Driscoll, CFA [email protected]

John Harmon, CFA [email protected]

Aragorn Ho [email protected]

John Mercer [email protected]

Shoshana Pollack [email protected]

Kiril Popov [email protected]

Jing Wang [email protected]

Steven Winnick [email protected]

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sweater report by fbic global retail tech nov 2015

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