Why it’s time for companies to change or be changed

Saturday, May 23rd, 2020

Shifting landscape won’t necessarily be devastating, Kevin Carmichael writes

Kevin Carmichael
The Vancouver Sun

It’s a bad time to be a maker of expensive clothes – just ask a maker of expensive clothes.

“Tailored clothing is probably going to be near the bottom of people’s priorities,,, said Stephen Granovsky, chief executive of Toronto-based Luxury Men’s Apparel Group Ltd.

(LMAG), owner of Samuelsohn Ltd., which makes $1,000 sports jackets and $1,500 suits in the north end of Montreal.

It’s not that LMAG’S core customers don’t have money to spend. Despite the COVID-19 cri­sis, the number of men and women working in finance and real estate was little changed from April 2019, while the number of workers in Statistics Canada, s “professional, scien­tific, and technical services,, category was only 2.7 per cent lower. Meanwhile, the year­over-year overall decline was more than 17 per cent.

The company’s consumers are the type that will power the recovery’s early stages. Gra – novsky, however, doubts he’ll benefit much from any pent-up demand. His customers kept their jobs, but they won’t be in the market for office clothes if the office is now the kitchen table.

“Retailers who are opening now that sell casual clothing and sportswear, and even on their online businesses, are seeing lots of initial demand,,, said Granovsky, whose company also owns Rochester, N.y.-based Hickey Freeman Tailored Clothing and Toronto-based Lipson Shirtmakers.

“If you1 re in the sweatpants business, we1re all buying more sweatpants,,, he continued.

“We1 re all buying stretch jeans and things of that nature. But the stuff you wear to work, the stuff you wear to weddings, the stuff

you wear to go to parties, the stuff that we make … we1re going to be somewhere in the bot­tom half of people1 s consumer spending priorities for some period of time, and we have to be prepared for that.,,

Economic downturns destroy companies with weak business plans. The Great Recession punished companies that had grown complacent with exporting to the United States. Canada ended 2009 with about 550 fewer firms than existed at the start of that year, ac­cording to Statistics Canada data, a quick snapshot of what a recession can do to an export­dependent country overly reliant on a single market. The coronavirus crisis is different in that it will also test executives such as Granovsky, whose strategy was entirely reasonable up until a few months ago. The recession is reshaping consumer and corporate behaviour, which will cause reliable streams of demand to run dry.

“We1 re already well over two months,,, Stephen Poloz, the Bank of Canada governor, told reporters on Thursday. “1t1 s going to be long enough for certain habits to change.,,

Poloz made the comments during an hour-long video conference, taking advantage of technology that existed prior to the crisis, but was little used because professional work was wedded to face-to-face meetings.

That notion has now been erased. Waterloo, Ont.-based Open Text Corp. has already de­cided to get rid of half its office space because it discovered that ordering its 15,000 work­ers in 30 countries to stay at home had no effect on productivity. Facebook Inc., Ottawa­based Shopify Inc. and Twitter Inc. all have set similar plans in motion, heralding a struc­tural change in service-based economies that revolves around commuting.

“Office centricity is over,,, Tobi Liltke, Shopify1 s chief executive, tweeted this week.

As a result, demand for commercial real estate, air travel, business suits and overpriced sandwiches won1t recover with the rest of the economy when the lockdowns are lifted. That won 1 t necessarily be devastating for the broader economy because the money that was once devoted to those things will be free to go elsewhere. Entrepreneurs will emerge offering goods and services that we didn1t know we needed at the start of 2020, and exist­ing companies will pivot towards the sources of new demand, provided their managers are talented enough to seize the opportunities.

“There are constraints out there now,,, Poloz said. “What are companies doing in the midst of those constraints? They are developing all -new ways of doing business. People are adapting. Those are the folks that will do more than just survive. They are going to explode in positivity afterwards.,,

Granovsky and his leadership team at LMAG have spent “thousands of hours,, overhauling their Rochester factory to produce face masks and the Montreal facility to make hospital gowns.

Lots of other companies have answered the call for protective equipment by supplying rea -sonable facsimiles with whatever they had on hand. Granovsky decided to do it right and learn how to make hospital-grade gear. That meant tracking down fabric that resists fluid and bacteria, and resetting factories for an entirely different kind of production.

The former was the most difficult, since hospital-grade material is suddenly hard to find. Granovsky made about 40 calls before he found a supplier, a source he is so protective of that he refused to name the company. “We made huge commitments up front for this fab­ric, in excess of $1 million worth of fabric right at the get-go to secure it,,, he said. “We sort of jumped into the deep end of the pool, both in terms of work as well as a financial com -mitment. We’re a company, like many others, where the pandemic threatens our core busi­ness.»

LMAG was rewarded for its efforts last month by an order for 200,000 hospital gowns from the Quebec government, which allowed Granovsky to reopen the Samuelsohn factory and recall 150 employees. Rather than death, the COVID-19 crisis could represent a new phase for Thomas Hickey and Samuelsohn, which share a combined history of more than 200 years.

“We took the position that for some period of time, this was our new business,,, Granovsky said. “We’re even prepared to make some sacrifices in our core business going into the fall season in order to continue manufacturing (personal protective equipment) at whatever pace is required by governments and the broader medical community.,,

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