Oregon is home to some of world’s great sport clothing brands. Nike and Columbia Sportswear were founded here and have global headquarters here. Adidas has its U.S. headquarters in Portland, and scores of sport clothing companies of all sizes and stages call Oregon home.
I had the chance to speak with William Tung who is the Vice President of International Distributors and Asia Direct for Columbia Sportswear.
“Everything is interrelated around the world,” Tung says.
For example, one of Columbia Sportswear’s largest markets in the world is Russia. Currently, Russia is an increasing concern for Columbia.
“Their economy is in turmoil because their currency has lost significant value against the US dollar. We sell to them in US dollars so if their currency (the ruble) has depreciated 50% against the dollar it now costs them twice as much, so our local sales are down.”
Tung went on to explain how everything is connected.
“You may ask why has it (ruble) depreciated against the US dollar and that is because the Russian economy is very dependent on oil. And the price of oil is down significantly. Why are oil prices down? A big part is because the Chinese economy has slowed. We are all interrelated and connected,” Tung says.
Even though a country is struggling to afford your product, Tung tells us that the best solution is not to lower the prices but instead sell less. They anticipate that a country’s economy will pick up, and in the meantime less product will be sold. The problem with lowering the price Tung says is that in two years when people can afford the product it is very hard to increase the price and still expect people to buy it.
“Consumers are very sticky. When prices are down, people love it. Try to bring them back up, it’s very challenging.”
Columbia made the decision to maintain their premium price in the Russian marketplace thus maintaining unit profitability while sacrificing total sales.
However, a Columbia product overseas may be slightly different than what you see in America.
“In Japan and Korea the vast majority of the products are designed in Japan and Korea for the local consumer. We have designers based in Tokyo, Seoul and Shanghai who develop products for the local market place. And it isn’t just for the size and fit but also colors, fabric and design.”
One of the most widely discussed issue of our time is the globalization of the production of our products. Why are so many goods manufactured in China, India and Vietnam? Most would guess that is due to cost of labor. The cheaper the labor, the less the cost to make a product, the more profit you can make on the sale of that particular good. But Tung tells us there is more to it than simply cost of labor.
“The cheapest labor in the world is probably in Ethiopia. Have you ever purchased anything made in Ethiopia?”
Unless you are talking about some kinds of tea or textiles, very little is produced in Ethiopia. This means that there is more to it than simply cost of labor.
“Labor is one component. In places like Latin America and Asia they produce things more efficiently. There is also the skill of the workforce. If your workforce does not read, it is hard to give them instructions to produce something. It is not just about the labor cost.”
Tung went on to cover another widely discussed topic: sweatshops.
“Everybody thinks that the factories are sweatshops and that is why products are made there. That’s not true, it is a myth. Lower labor cost is very important but there are many factors of operating an efficient factory to produce goods whether it is something hightech like a mobile phone or something lower tech like a tee shirt.”
So why aren’t products being made in Ethiopia? A lot of this is because even though they may have lower cost of labor they may have corrupt government, and illiterate workforce, or poor infrastructure.
“Most people around the world think Americans know nothing about anything outside of the United States. It is good to recognize that here in the United States we are just one of many many countries around the world and people are different and things are done differently around the world.”
No matter the size or impact a nation has on the world, everything is interconnected.
About William:Age: 51
Your family: wife Leah, son Justin (18), daughter Gemma (14), dog Louie (7)
Where did you grow up?: suburbs of Philadelphia
Hobbies: watching his kids grow up, history, stuff bottles, watches
Fun Fact: adjunct lecturer at PSU’s Master of International Management program, member of Penn State University ‘Skull & Bones’ Society