Difficulty for the sock industry due to lack of innovation
Smith goes in-depth on socks in this excerpt. Smith and others have been waiting for major changes in the sock industry, but they have not come, and the stagnancy of prices has been forcing producers to cut costs internally, and sock producers are struggling to remain solvent.
Citing this Excerpt
Oral History Interview with Robert Sidney Smith, January 25, 1999. Interview I-0081. Southern Oral History Program Collection (#4007) in the Southern Oral History Program Collection, Southern Historical Collection, Wilson Library, University of North Carolina at Chapel Hill.
Full Text of the Excerpt
I think we were going to start on the same trend line for socks. Socks, there were probably five or six hundred companies in the sock business when I joined the Association. Certainly there was right after World War Two. Socks have been always different than sheers. It is unique in many ways. There are more styles and more sizes and more colors in socks and more patterns in socks than there are in ladies' hosiery. There always have been. A lot of people don't realize that or think about it, but ladies' hosiery really doesn't come in that many colors. But socks do. It is that degree of differentiation that has been able to support more entities. Everybody has got something a little different. It is that diversity that has maintained a fairly large group of companies. Now, manufacturing technology has changed both in speed and in computerization and in pattern changes. Companies have made the capital investments to get into the equipment, which means that the ones that have made that capital investment have been more competitive. But, that really didn't matter up until the real emergence of discounters, when price was the competitive factor. If you can't continue to compete on price, you are really up against it. We have been predicting -- everybody in the industry has been predicting -- a real major shakeout out in the sock business, and it hasn't come. It has been quite surprising to a lot of people. But, I think it is the resilience and persistence of these smaller entrepreneurial based sock producers that have been able to survive in any kind of environment. It is only recently, I'm going to say the last five years, that we believe that the situation is changing enough, that we might be right on the precipice of the sock shake out. Here's why. If I go to a retailer and say, “Here are my socks. Do you like them?” “Yes I do. I'd like to buy them.” “Great. Here's my price.” They say, “Wonderful.” I buy them. We go into business. This retailer is one of these large discounters. I produce that year's supply and I go back to him and say the next year, “I need to raise the price to cover the cost of yarn and the cost of labor.” They say, “No. There will be no price increase.” Okay. So, I go back to my company and I go back home, and think, if I can't raise my price, I'm going to have to cut out overhead, cut out inefficiencies. I have to get my house in order. That's what they have done. They have tightened it down. You go back to your retailer the next year and say, “Now I need a price increase.” “No. You're not getting one. In fact, I want to lower prices if you want my business.” Okay. So, you go back home and think, “Boy, squeezing that first ninety percent of inefficiency out was, you know, those were the easy to identify ones. Now I got to squeeze that other ten percent out.” That has been hard. Oh, that has been just very difficult. This is where, “Boy, if I couldn't afford that new more efficient machine before I have got to find out a way of affording it now, even if I've got to borrow to get it. Boy, squeezing out that last ten percent has been awful.” People have gone through that. Now a year goes by and I go back to my retailer and say, “Boy I've really got my house in order, but I need a price increase.” They say, “No.” You go back home. What happens now? That's where we are. Half of all of the sock manufacturing companies in the United States lost money last year. The only way that many of the sock companies and this number of sock companies have continued to operate is through marketing and through this introduction of new styling and this proliferation of new end uses. The unit growth has been in place, not dollar growth, except connected to unit growth. But, unit growth has been going up and up and up and up and up. So, they've been able to spread their cost out on more units. That's kept them afloat. The underlying question has been--. As long as this sock market in America and this sock consumption in America continues to grow, they’re able to spread those costs. They are able to hang on a little longer. They've been able to play the game. What happens when unit growth stops or turns down? It's going to be like a bloody train wreck. It's going to be like one car running into the next car right behind the next. It's going to be like dominoes going. The third quarter data for 1998 showed the first negative in units in socks, both at retail and at wholesale. As we sit here today, I'm waiting for the fourth quarter numbers. As we look into 1999, is the market saturated? Has the consumer now got enough socks at home in their sock drawer? Remember, the units don't have to even fall. They can stay flat. It's the growth that has kept them afloat. What happens if this is the era and is the time in which that unit growth has stopped? That's what we're waiting for.