Perry Gaellis Case

In Fiscal year 2010, Perry Ellis had over 90% in men sportswear and swim wear with $754 million in total revenue. Perry Ellis finally expanded their women business including Laundry, Rafaella and C&C to 29 percent of PEI’s total retail sales for the Fiscal year 2015 and the total revenues of the whole company is $890 million.
Rafaella is target to women from aged 30 to 55 and an entry-level price point in career and casual styles, the products are classified into three size ranges: Missy, Petite and Plus. The Missy sizes are traditional sized clothing, whereas the Petite are for small sizes and Plus sizes are for larger framed ladies. The Career lines are designed with Core basics, fashion related separates and replenishment items with
complementary styles primarily in pants, skirts, knitted tee, blouses, sweaters and jackets made of cotton, cotton blend, silk, silk blend, synthetic, synthetic blend, wool, wool blend and linen fabrics depends on seasons. They could be sold as individual items but also could be worn as coordinate into perfect matching outfits. Rafaella ordered sample fabrics in all colors in solid, print pattern and yarn dyed pattern, they had made proto samples in all colors, dress-up on mannequins and displayed in the showroom with trendy and smart looking in collections. Rafaella presented their collections in four seasons- Spring, Summer, Fall and Holiday. The presentations could be demonstrated the business models in a small scale for buyer’s review and consideration in terms of vision and hand-feel touch. The proto samples were a hypothesis business idea that needed to be recognized by the market. During market week, sales team would introduced the products and received initial order from current and potential customers which was four to six months prior to the retail selling floor. As a result, market team could gather the order information and enable for production planning to meet the anticipated demand better. Marketing team would analysis the initial orders and feedback from the focus group and secondary customer. They could determine which styles could be launched to the stores. If the purchase rate were low, they had to modify their design and refined the styles based on customer’s comment for the next launching collections to approach customers’ need. The proto sample test could address the fashion trends and women’s wearing categories and interests. “Fabulous fit” makes a focus and gives Rafaella pants a unique position in the markets, the pants are sewn in high quality fabrics with professional cutting and give a perfect fitting styles and performance. There is two special cutting pants- Curvy Fit pants which are sits at the waist and have a contoured waistband through hip and thigh; Classic Fit pants which are sits slightly below the waist, relaxed body from hip to thigh. Before acquisition by Perry Ellis, Rafaella had approached social network focus by blogger, media publications such as Oprah, In Style, WWD and Lucky Magazine. Due to direct sales to customer, they could respond faster to customer’s needed in design, maintained consistency in quality and fast delivery, they had built up their brand and relationship with long-term buyers and resulted in a loyal customer and consumers based.
Rafaella did not own any production facility.
Since 1982, they sourced manufacturer from China, Vietnam, Cambodia or even Qatar through their agent in Hong Kong. Rafaella would block booked a bulk volume of fabrics, zippers, linings or belts in running qualities in key colors, such as black, charcoal, navy and brown. The huge ordered commitment could make the best negotiation on prices and constant supplies. The non-exclusive Hong Kong buying office would responsible for sourcing suppliers and manufacturer, coordinated with production process, monitored the workmanship, provided technical support, fitting instruction and quality control to ensure an on-time delivery schedule. The same buying agent in Hong Kong had continued the service contract with Rafaella after acquisition by Cerberbus. In 2008, Rafaella had stopped the service contract with the Hong Kong office but took over the office and employees as their subsidiary in Hong Kong. Rafaella then stopped bulk ordered fabrics and trims to avoid excess inventory. They continued to purchase their garments from factories in China, Vietnam, Indonesia and also in the Middle East. They would source fabric for their manufacturers which remained them with a constant quality supplies and competitive pricing. Since they had used many manufacturer, fabric suppliers and agents for several years, they had established an excellent relationship with them in high quality performance, facilitated an ultimate price control and reliable product supply. The Hong Kong office had a very good quality control on the raw materials and merchandises to meet with customer’s specifications. Fabrics would be inspected upon receipt and prior to production in factories. This rigorous quality control resulted in low return rate on defective merchandise after goods were distributed to end
buyer.
The outsourcing production allowed a maximum flexibility production and avoided significant capital expenses, excess inventory and management costs for production operation. In 2010, Rafaella production was about 97% from Asia. They did not have long-term arrangements with their manufacturers and they continually looked for additional suppliers for extra production capacity and lower prices as market needed. In 2010, Rafaella had entered to a centralized distribution system and logistics services where most merchandise was received, inspected, re-packed, stored and distributed through its warehouse in New Jersey. To facilitate the logistics efficiently and less costly, manufacturer would packed the merchandises into pre-pack according to orders and private label’s requirement. The pre-pack included six, eight or ten pieces of garments, in single style and color but different size assortment per their pre-set sizes ratio. This pre-pack offer helped to minimize the distribution cost and wrong sizes shipping and also reduced the unsold inventory in an undesirable size assortment.
As mentioned above, Rafaella would negotiate better price in fabrics and trims on behalf of manufacturer in bulk volume to reduce cost.
The shipment to United States required quota before end of 2008, Rafaella used to pre-book sufficient quota from import and export company to avoid price fluctuation in the market and could remain a stable price structure throughout the year. They would also manufactured from non-quota countries like Qatar for cotton pants which quota were extremely expensive in China in the past. After elimination of quota system by end of 2008 for China, they had faced greater price pressure and needed to outsource manufacturer from North China, new province of Indonesia and Vietnam for lower manufacturing cost.

Rafaella would shipped in full container with Go On Hanger or hanger flat packed in cartons in maximum loading units to reduce the freight cost. This also reduced the work load and saved in-house labor cost in New Jersey Warehouse for in-land distribution in United States.
The continuation of the Rafaella Hong Kong office from agent to subsidiary office could reduce the commission cost and provide more resources support for whole Perry Ellis Group.
The promotion and marketing with the used of social network by blogger, media publications and magazine had saved a significant advertising cost.
Rafaella had made an outstanding price point with all these arrangements and gave the sufficient profit margins.
Rafaella brands shown fabulous fitting focus, competitive price level, high quality standard, long-term and loyal customer based and tremendous retail locations. All these competitive advantages made interested to the private equity firm, Cerberbus and current apparel entrepreneur, Perry Ellis to buy their business.
Under Perry Ellis, Rafaella is imaged for modern women, “Fits” Her life and Her style and Her body. The sportswear collection looks polished, full of confident and personality for work and leisure. Rafalle can be further sourced with Perry’s current manufacturer and supplier through their different international offices – Shanghai, Hangzhou, Guangzhou, Hong Kong, Ho Chi Minh City, Jakarta and Taipei which give them bargaining power to maintain a competitive price level in the market.
The women apparel industry is highly competitive in United States, so many new designers and importer providing different types of clothing. The wholesale prices are subjected to the price pressures from both retailers and consumers, the increased competitor and economic variations. In addition, the consolidation in the apparel industry had reduced the number of stores and floor space which could impact the sales. To continued Rafaella collection with the legacy of fit and full collections. Perry Ellis are going to develope Rafaella with women’s intimates, shapewear, sleepwear and loungewear as per their Annual Report 2015. Due to price pressure, Rafaella had reduced the sales from the retailer and department store. Meanwhile Rafaella had widen the distribution channel by on-line stores, direct sales to customer and affiliates programs. The e-commerce websites bring them to greater market share. On the other hand, Perry has input their brand Laundry by Shelli Segal through Rafaella’s strong retailer relationship – Nordstrom, Bloomingdales, Lord and Taylor, Dillard’s, Belk and Macy’s. Perry Ellis women business including Laundry by Shelli Segal and Rafaella were covering 29 percent of their retails sales in 2015. Perry Ellis had received a “Breakthrough Award” given by Women Executive Leadership and 20/20 Women on Boards, Two supportive organizations in women business. Rafaella is valued as Perry Ellis’s high-performing cord brands as well as Laundry by Shelli Segal, Perry Ellis, Original Penguin and Golf Apparle. Under Perry Ellis planning, they will further solidify their standing to be one of the world’s premier branded lifestyle apparel corporations.