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Hello and welcome to another episode of the All Thoughts podcast. I'm Tracy Alloway.
And I'm Joe Wisenthal.
Joe, we've been inadvertently doing a tariff series basically on what the trade restrictions mean for a bunch of different industries.
So funny that I've read your mind. Yes, it's like we have to go down the list. There's actually it's impossible. You know, every industry is going to be affected by tariffs a different way, and there's this temptation like, Okay, let's just talk to someone from literally every single industry.
Today.
On May seventh, we released an episode talking about the video game industry. But yes, we could go down the line of every category within GDP and learn something.
Video games, len tols, yes, the important stuff. No, So when we're talking about tariffs, I think one of the really big industries that is obviously going to get impacted has to be clothing and textiles. Right, So we know places like China, Vietnam, Sri Lanka, Bangladesh are huge textile exporters, and so we should talk about that and what it actually is like if you're running a clothing business in the US to source textiles from abroad.
You know, it's funny. I was at some event for my school and I ran into a fellow dad, or for my kids school, and I ran into a fellow dad with a clothing company. Like the two days after the initial tariffs were revealed in early April, he was talking about he was going to add a button on his website and made some sort of athletic gear, talking about like this is the pre and post tariff prize.
He was talking about how it might make sense in certain circumstances to move some of his manufacturing outside the US, especially what he sells to non US customers so much in textiles specifically. The other I think about textiles, of course, is when people think about the China shock. You know, that's one of the first categories that comes to mind, the fact that the US used to have a booming textile industry, particularly in the Southeast, as we know.
Yeah, we visited the remnants of the American textile industry in North Carolina.
So there's a lot there.
Yeah, all right, Well, I am very pleased to say we do, in fact have the perfect guest. I have to do a disclaimer up top because this guest is a longtime friend of mine. We actually went to high school together in Tokyo, and she started her own clothing company and I was involved at the very beginning doing product testing and caveat. I have a lot of their clothes. I have dresses that are I think at this point are like ten years old, but they still look amazing.
So I am a big fan of this company. That is my disclaimer.
Tracy, did you ever do any modeling?
Yes?
I thought, did you ever do any modeling for this company?
No?
Okay, no, no, no, we can talk about that later. I did modeling when I was like seventeen in Tokyo, where the standards are arguably a lot lower. Anyway, I'm very pleased to say we're going to be speaking with Sarah Lafleur. She is the founder and CEO of M M.
Lafleur. So, Sarah, thank you so much for coming on off us. Thank you for having me. It's a true honor, sir.
What is your favorite Tracy memory? And did you know she would go to go was going to be a star podcaster?
One day I thought she was going to be the US ambassador of the United nations.
So yeah, I guess she.
Was always a true intellectual, uh huh. And I would say precocious beyond her years.
So this is yeah, that's probably fair. All right, Sarah, talk to us about the company. How would you describe Amma Lafleur and when did you get started?
Sure? So I started the company in twenty thirteen with my two co founders. I myself do not come from the fashion world. I actually worked in management consulting and then in private equity, right, yes, I was at Bain, and you know, I always struggled to kind of find good, well made, appropriate but still very stylish, professional women's clothing. Like I just thought there was a real dearth in the market. And I was never I had never been
in fashion. My mother actually worked in high and fashion and she would always bring home these like beautiful, you know, pieces of textiles and got these Chanel suits and I was like, gosh, that's so beautiful, and that's what I'm going to wear when I grow up and I'm a working woman, and lo and behold, I found out, you know, for my budget, I was not going to be wearing
a Chanelle suit to work. But the idea stayed with me and basically when I was twenty seven, couldn't get into business school, didn't know what to do with my life. Private equity was not quite the right place for me. I was like, you know what, I've always I've always thought this was a good idea. Let me, let me go for it. So, yeah, it's been gosh, it's been
almost twelve years. We launched in twenty thirteen. Were predominantly an e commerce company, but we also have eight stores across the country and we also sell through wholesale.
So what do you we'll get into, you know, wanted to get into the nitty gritty of the business and the supply chain and so forth. But from a very big perspective, someone sees an ad for your clothes on Instagram. Maybe they see a shirt or a jacket or pants that they like. Where was it designed? Where did the materials come from, and how did it who put them together? And how do they get to the end?
Shopper, Yeah, great question. So we are all designed in New York City. Our offices are, you know, in the Financial District actually, and it's my creative director who usually you start with fabric with collections. I think this is like a little known fact. People always think you sketch first and then you find the fabrics, right, But it's really so much of fashion is really led by the
fabric and textile industry. So you you know, often you go to these fabric shows or these fabric mills come to you, you're inspired by different fabrications, and then you take that and you say, okay, what am I going to design into this. Maybe it's a jacket, maybe it's
a shirt, what have you. And then from there the designer sketches and then the pattern maker, very important person I call you know, this person is like the architect of the clothing, will actually then say, okay, in order for this dress, let's say, to come to life, here's how the fabric needs to be laid out on a piece of you know, on a piece of fabric, and
cut and then put together. Different companies do different things, but you know, if you are working with a fabric factory overseas, then oftentimes you will then send the pattern overseas to the factory. The factory will do the first what we call fit sample that gets sent back to
New York. You fit it in New York, you know, with your fit model, and you know, depending on whether you're a brand that spends a lot of money on product development or not, you might do one too, even up to three fit samples before you ultimately go into production in the factory overseas.
Wow. Okay, So, given the importance of the fabric in the design process, talk to us a little bit more about how you actually source that because the fabrics that you use are also a big differentiator for you. Right, you have very special fabrics and again I'm going to sound like I'm doing an ad for this company. We love that, but I mean they're great fabrics for work where they really are and they're sort of specially made is my understanding for exactly that scenario.
Yeah, we really focus on machine washability and wrinkle resistance. So Japan is great with that. You know, it's not your mother's polyester. Synthetic fibers have really come a long way. So there are a lot of synthetic fibers that behave like silk or look like silk, but are still machine washable wrinkle resistant. But we also love natural fibers and natural fibers. You know, places that are good at that
historically are when it comes to wool, Italy Germany. When it comes to silk, China, like, China is really one of the few countries now left in the world that still actually does silk. Same for wool in cashmere. You know, if you want to do alp haka, well I'll paka like you could still go to Peru. There are other places. But when it comes to most will most cashmeir, I
would say it's China. You could go to Mongolia for Kashmir, but there aren't that many places across the world that that do these natural fibers.
For the types of sort of high end stylish clothes that you sell. Where are the big manufacturing hubs right now, and where do you, like, you know, explain the link. Okay, there might be some you know, textile company that's really good at you know, advanced synthetics in Japan. I know that well because I buy all my clothes from Uniclo and they never wrinkle, which is really nice because I'm
very lazy. But then talk to us about like, okay, how what is the process from like getting the textiles to wherever they're actually cut in a symbol?
Yeah, great question. Some factories are vertically integrated, meaning they both make the fabrics or you know, they have a partner from whom they source the fabrics and then they produce the actual clothing at their factories. I would say generally, although not always, lower priced products are made this way. If you are for us, we like to nominate our fabrics.
That's the word that's used in the industry, meaning we are specifying where the fabric should come from, what we want it to be, and which mill we want it to come from. And then the factory, which is often in a different country they usually are not in the same country, takes on that fabric from that mill and then cuts it and produces it. So often, though not always, the two things, the fabric mill and the factory are two different companies in two different countries.
So how do you find factories and mills to work with? And I guess a questions as a startup founder, what was your first experience actually finding a factory slash mill?
Actually? Like, well, I think I prefaced earlier that I never worked in fashion, and so literally I contacted the New York City I think, you know, I was an economic development corporation and for a lot of fashion designers right who are trying to get their foot in the door and start their own line. The garment district in New York City is amazing, and I would say, I mean when I got started a decade ago, he was it was I mean, yes, a declining industry, but definitely
more bustling than it was now. And there was a directory of factories that you could contact. But I mean it was kind of laughable because a lot of these factories A don't use email. I think they may have a phone which they may pick up if it's a good day. Really, these factories, the way you get in the door is by knowing somebody who's worked with them, and even then they may not be willing to take
you on. You know, it's a huge risk for them. A. Can this designer actually pay for whatever it is that I'm going to do? And B is this designer actually going to be around a year from now? Because you know, fashion people come and go so fast, and so unless it's through a connection or a referral or you're you know, somewhat established, it's really hard to get your foot on
the door. I mean, I was begging people to take my orders when we first got started and we were doing manufacturing in the garment district.
Oh, you're doing manufacturing in the garment district.
This was this was a decade ago, but yeah, I got it today.
If you want to go to a factory somewhere in Asia and you have the textiles, what are like some of the minimums you know, like what's a minimum run? Because I have to like, like you said, you know, they want to know that you're still going to be
around from now. They have to allocate capacity. They presumably don't want to just allocate a little capacity and then have to change talk to us about like what you have to bring to the table from a volume standpoint, in terms of a reliability standpoint, in terms of a dollar standpoint, such that it's worth taking you in the door.
There's huge variability in both factories within one country and then from country to country. Right, So I would say China, Once upon a time, probably the moq's limitedmnium order quantities were north of a thousand easily okay. But now as wages in China have gone up, a lot of factories that we work with are willing to do moqus as low as one hundred. There might be a sort charge for it.
Wait, why is the lower volume? Why take lower volume as wages.
Have gone up because brands have moved to other places like Bangladesh, places in Northern Africa. I mean it is. I don't want to say it's a race to the bottom, but it is in many ways. You know, as labor prices rise, brands are always saying like, Okay, well I gotta go cheaper, I gotta go cheaper. Oh interesting, So they you know, first went to Southeast Asia, they moved
over to you know, South Asia, you know India. Bangladesh still does a lot of you know units where they need one thousand, two thousand, sometimes north of ten thousand units. And then also Northern Africa is now kind of considered the next frontier tracy. This is interesting.
You know.
One of the things I've seen a couple of people talk about is like China experiencing its own China shock because some of these low end textiles, those legacy operations are now competing with cheaper wage countries, the same way textile companies in the US for competing with other Asian countries.
Yeah.
Absolutely, Okay, So Sarah, we got to get to the meat of this discussion. I guess let's talk about the tariffs. So when I when I asked you about this issue, you said that teriffs were all you've been thinking about for basically the past month.
Yes, and even that feels like an understatement. I think I dream about it. I mean, it is been so detrimental to the business. It's not like running a fashion business in twenty twenty five was a cakewalk. Right. It's already an incredibly competitive business with razor thin margins. We're dealing with pressures on the marketing side from you know,
Meta and Google, right. I mean, we just went through the pandemic where I had to close all eleven of my stores and then gradually open them back up again to the point where now we have eight. I mean, it was it was devastating going through the pandemic, and we survived by the skin of our teeth. We've made it through the other end. We had just finished budgeting for twenty twenty five, and I think, you know, this will probably be not a total surprise that I'm a
New Yorker. But you know, we were saying, okay, when when Kamala Harrison get elected, we were like, well, everyone says Trump's going to be good for business. We have a big business in Washington, d C. Change of administration is usually also good for our business. The first thing we came, you know, ran across was the Doge cuts.
So our two DC stores are down about twenty to twenty five percent from l Y while all of our customers that come in are either have been laid off or are nervous that they are going to get laid off, or that they're going to have they're going to be some repercussions. So we were already feeling those effects going into March. I still remember the moment the U what was it, Liberation.
Day, April second.
Yeah, yes, I was sitting in my office. We were doing a meeting and my phone blew up. I'm on, you know, various text change with other fashion founders and CEOs, and they're saying, have you seen the numbers? And you know, I mean just that's all we could focus on.
You are one of the people squinting at the billboards.
Aha, ha, we were, And I was like, someone get a screenshot of this. Anyway, the numbers were kind of beyond I think what anyone of us expected, right, And I remember I was actually in China, Hong Kong, in Vietnam where a lot of our partners were or are in November, and you know, we were all talking about and like, how bad do you think it's going to be? And one of my partners was like, you know, I don't think it can be that bad because where else are you going to get your silk? I mean, where
else are you gonna get your silk? So I predict ten percent. It can't be higher than ten percent. Yeah, And then when we saw the fifty four percent on top of the thirty percent we were already encountering, we were like, well, that's just insane. And then it just got worse and worse and worse. I mean, i'll tell you between Liberation Day April second, and then April eleventh, we were on calls with our factories like night and day. I don't think I don't think my factory partners slew
for those seven days. You know, any hour of any day we could reach them, and we were just basically saying, get it on the boat, get it on the boat, except it was total chaos at the ports. So it's just like, you know, after forty eight seventy two hours, it was like we couldn't even secure a space on the boat and like the night before it's all about to go down, you know, I'm on a call with one of my partners in Hong Kong, and I'm like, did you get it on the boat? And he was
like no, I couldn't get this on the boat. And then I was like, okay, then don't put it on the boat. And then you know, and then whenever I can't even remember the exact timeline now, but whenever, you know, we went into whenever it we went into it, like the ninety day grace period, I was like, get it on the boat, get it on the boat. I mean, it just felt like it just felt like I hate to use this metaphor, but like it's like the last ship or the last helicopter out of Saigon and everyone's
just like trying to get their things on. Yeah.
I mean, it's okay metaphor because one, you know, that's the helicopter, but it's still probably you know, still coming out of Vietnam. But actually, what is so right now we're recording this May seventh, I guess two questions is like, what is your like sort of geographical exposure because that's China, it's to only ten percent and and it may get I think you know a lot of people think that will get even if there's no deals, that that ten
percent will get extended. What is your current geographical exposures? But to the ten percent and one hundred and fifty four percent.
Well, I had to cancel fifty percent of my May collection. Wow, because they were all from China Okay. Many of the things were late because they were coming out of places like Vietnam, Okay, where it was initially hit with the fifty four percent and we were saying, oh, I'm sorry, it was forty seven percent. We said, don't don't chip it.
Oh, so there were even though there was got plus even back to ten percent fairly quickly.
It had to create a hiccup totally because it's like fashion. It's like it's all about your selling window, right, and you bring in your summer clothes and you want to sell through most of it within six weeks, and if you miss that selling window, well then we'll wait till next year. And so some of our products are going to be held for a whole year and they're going to wait for summer twenty twenty six to be released. I mean, this is just I'd chalk it up to
bad luck. But we actually we have partners in Turkey, we have partners in Portugal, China and Vietnam, but by far we do most of our production in China. Got it? And why is that? It's because the quality is exceptional,
the prices are not cheap. You know, I have customers who've because we've been really communicating transparently with our customers, saying, you know, here are the consequences that we're facing and our fact Our customers are you know, very sharp, intelligent women, and I've had many of them email me saying like, you know, I'm really sorry to hear all this. I'm going to support your business, but like why don't you move your production back to the US? Like why don't
you move it back to the garment district? And I'm like, I don't even know how to explain, Like that's that industry is not only dying in many cases gone, it could never support the kind of quantity that we want to do. And by the way, we're not even that big a business, you know. And you know, they sometimes I get like I knew, I knew it was made in China because you know, the qualities was X y Z and I was like, you know, I was like, have you ever seen the inside of a factory in China?
Because you know, the workers who work there, they get free lunch. They have a farm at the factory where they make fresh vegetables and their lunch is served using those fresh vegetables. And they have these beautiful, beautiful dormitories. Like there is a lot that these Chinese factories do right to treat their workers right. And meanwhile, the garment district factories, everyone brings their own toilet paper because if
they put toilet paper in the toilets, they will get stolen. Right, Like everyone thinks like made in New York, beautiful, excellent quality, like great labor regulation. It is not the case. You know, if it happens, it's very few factories that are very selective and very very expensive. The truth is, the American consumer does not want to spend that much on clothing, as prices have gone up in every single other category.
Clothing has remained relatively stable since the nineteen nineties. And so we can't have it both ways, you know, if you want to continue to buy clothing at the prices that we're used to, we have to have global trade.
Yeah, So you mentioned transparency with customers. Talk to us about how you're handling the pricing side of things at the moment. Are you Are you going to put a little button that shows the pre tiff and post tariff price or something like that.
I am so, I'm so tempted to, But you know what I worry about is that she's just not gonna buy it just transparently. We've already done a round of cost cutting, and from where I'm sitting, I see recession on the horizon. So I feel like when I see recession coming, I don't know if I can also increase prices and expect customers to just eat it and get on board with it. So you know, I'm getting my margins squeezed. We're looking at our August collection right now.
My August collection, unfortunately, is one hundred percent made in China, and we are making very serious trade offs about what we're willing to pay a big, big tariffs on and
bring in versus what we're willing to let go. And also my factory partners, like this clothing has already made, August has already been made, sown, it's in a box, ready to get on a boat, and they're desperate because they've already put in their investment, so they're also negotiating with us, saying, hey, if I were willing to reduce my prices by.
Yeah, that's what I was wondering. How to what degree are those conversations happening about the factory site eating the costs or giving you reduction.
It's happening, I would say, across the board, you know, we're or they're saying, like, my goal right now is just really to be able to cover my costs. And you know, I was like, well, you know, I've been hearing these things about like the Chinese government doesn't want any of these factories to fail, Like like are they what's gonna happen? Is there going to be a version of you know, Ppe, the Ppe loan in China? Like
how how how are you guys going to survive? They're saying, I think they're going to pump more money into the banks, but none of this money is directly coming to the factories, Like they're fighting for their survival too.
What are the other levers that the factories can pull to try to offset some of the impacts, so you know, maybe offer discounts to clients but is there anything else they can do to sort of deal with the situation.
One of my factory partners actually wants to launch am Laflur in China. Oh. He was like, Hey, I'm gonna be stuck with all this inventory. What do you think about m M laflur for the Chinese market? And I was like, go for it, like I've always wanted to do it. It's not it's not as though, you know, so like I don't know from from great challenges could come opportunities, but it's a long shot, I mean. And so we're
also looking at that as well. And he's saying, send me all the product that's going to be stuck in China and let's see if we can actually launch a memla Flur China. So it's not as though, you know, they're not you know, they're also thinking of every creative solution possible. We're firing on all cylinders. And then of course, like there's the country washing that's happening. I know, I know that we're very careful about it and trying to make sure it doesn't happen.
But this is the idea of moving production elsewhere totally.
And I should say like finished product elsewhere right now, this.
Is right, So it's not the production, it's basically live.
It's exactly it's the product is finished, send it to a third country, switch out the label, and ship it to the United States. I've got three kids, so I can't end up in prison. But I know for a fact that it happens, and it'll probably happen a lot, and gosh, I mean, I'm sure the government will make an example out of a few of them, but it's going to be impossible to trace all of them, so that that's going to be that's definitely going to happen across the board.
Joe, there is an irony in the idea that like, okay, Chinese consumers could end up having more clothing choices in the form of an mm Lafleur store in Beijing or something like that, and meanwhile, you know, the clothing available to American consumers is potentially shrinking.
Well it's you know, I was actually talking to someone this morning and they're like, yeah, inflationary in the US and disinflationary everywhere else in the world because of the sort of blood of good.
Yeah, the US is the one exporting deflation.
Now, Yeah, that's right. It's actually it's actually kind of strange. The factories that you work with in China, what have they done either in recent years or when they look to the future about bringing their know how in capacity to other Asian countries. So then it actually is manufactured in Vietnam and how much capacity work it's being done on those fronts.
Yeah, I mean, I think even from the last Trump administration, a lot of Chinese factories kind of saw the writing on the wall and so they were diversifying their sources. And so I have some factory partners that have opened up factories in Vietnam in the Philippines, and I mean it's it's kind of fascinating because all the workers will be Vietnamese, but the you know, the kind of leaders in the factory are all from Hong Kong, and even
that is tough. Like I think one thing that's like not understood about garment manufacturing is it's a real trade. And your best sewers are people who have been doing this for decades, you know, like you're you're a baby sewer if you've only been doing this for like five to ten years. The people who make your samples, you know, your best sewing you.
And this is another reason why it's fantasy, the idea that this can all be done us, because.
They're just do you even know how to use a sewing machine? I don't.
I just bought a sewing machine. I'm going to use it for the first time tonight. I'm very excited and nervous.
Great, there you go. Those are most Americans, you know, very intellectual. They might know how to code, but they couldn't. They don't know the first thing about how to use a sewing machine. And they're like, bring garment manufacturing back to America. And I was like, people don't know how to sew a button on they bring it to the dry cleaners, Like, in what world is garment manufacturing actually going to come back? So it's just it's it's kind of preposterous to imagine that that's a future.
And therefore it's even slow. And this at the level of quality that you expect for your clothes. It's not trivial to transport have those skills and capacity emerge into Cambodia or Vietnam.
Oh oh my gosh. Yes, okay, So like I'm let me go back to silk, right because silk is silk is a very hard material. First of all, you need to start with like the mulberry trees and the silkworms, right, And I mean creating silk is a very long supply chain and a very difficult supply chain. China is one of the few countries that actually do it. And then sewing silk. Silk is super slippery, right, Like that's kind
of you. You can make sense of it, Like trying to sew silk in a sewing machine takes a really skilled hand. So you know, China is the only place where we do silk, and I we literally don't have another country to move silk to, Like we're saying like maybe the Philippine can take it if it's owned by a Chinese factory, Like we're desperately looking for a new
silk factory. I mean this, I say to all all people who shop for Christmas in Hanukah, like, buy your silk now, because you're not going to see it for a while.
You mentioned earlier that you see recession on the horizon. Talk to us about why you think that. And then also like how useful or how accurate has the clothing business been in predicting previous recessions. I know, well, you've only been in existence for ten years or so, twelve years maybe, so there aren't that many examples. But I imagine like at this point you have some experience. Well it feels.
I was just at like a retail industry dinner and they were joking like every year is a new black Swan event, and I was like, yes, I do really feel that way. From the pandemic to you know, Silicon Valley Bank going under to actually one of our other lenders also went under. And now this.
I think SVB was a lender for you.
Yes, we banked with sphoeb It was yeah, you know, seventy two hours that I never hoped to experience again. But I think what this is. I consider myself an optimist, right, Like, why else would I be an entrepreneur, and you know, be foolish enough to think that we are the one percent that will somehow make it through. And yet all these experiences over the past five years, I mean they have hardened me. I've definitely become significantly more conservative in
all of my predictions and forecasting. And basically, you know, yes, everyone's saying like, oh, don't worry, Tariff's gonna like come down again, like you know, Trump's not gonna actually do it, like they're gonna call his bluff. And I was like, it doesn't matter. The damage has been done, like I've already cut my costs, Like maybe maybe he'll undo it, but then who's to say he won't do it again. And so I've clamped down on every expenditure possible.
So on this note, you said April second, you had just finished your business plan, Like how do you actually incorporate this type of uncertainty into planning and hard numbers?
It's really hard. And by the way, because I still don't actually know how much inventory we're going to receipt for the rest of the year, right, I went as conservatively as I thought I could without breaking the business. And you know, when we're talking about cutting costs, like there's no you know, people use the expression like cut fat, like there's no fat left to cut, like I'm cutting into the muscle. But you know, survival is the name of the game, So that's what we're going through.
This isn't specifically terrif related, but since you mentioned it in the earlier in the episode, I'm curious, what are you seeing on the digital channel side. You mentioned, you know, fighting frideballs or selling through meta and all these platforms. What's the what's happening there that you're seeing.
Well, we got in really early into the Facebook game. Yeah, I guess this was like we started advertising in twenty thirteen, twenty fourteen, and like, gosh, those were the Hey days, right, and we could acquire customers for thirteen dollars, which just like for context, I think now it's about two hundred and fifty dollars. That's probably understating it. It is massively expensive and yet probably still the most effective, right, And I think the lack of competition there is a real problem.
Like we've tried Reddit to mix success, We've tried TikTok to mix success.
You know.
Actually another quick question, this is something I've wondered about. I don't many of the clothes that I buy, Like it's because I won't buy through Instagram or even buy online. But I'll see something that gets flashed to me on Instagram and then I'm like, oh, that's a nice shirt or whatever. When Instagram launched it's inside shopping where you could launch a store in Instagram, I was like, oh, this is a great idea, just like price a button,
use Apple Pay and then I'll get it. And my understanding is hasn't taken off, and that actually there is not a lot of in app shopping still in Instagram. Do you have any view insight into that.
We have not had as much success with that, But our price points also higher, so I can't really you know, I think if you're like buying a nine dollars hairclip, I mean, guilty as charge, Like, I think there's more success there. I think for something that's sitting at our price point, it's still Yeah, I'm not going to see instant conversion. Yeah, but it's exactly what you said.
Your clothing is not an impulse buy for sure. I have impulse spot off Instagram and ended up with some strange products.
Gosh, and they need they keep on mounting. Yeah, yeah, I guess I will just say. I think, as you know, small business owners like we can do everything right, and I think a lot of us won't make it. That's the truth. A lot of us will be out of business within the next six to nine months, and I think the consumer doesn't really understand that. I think actually even people who are in retail, who are one layer removed.
Don't understand that. I was chatting with an executive of a department store and he was like, well, actually, sales have been great because everyone's rushing to get stuff, and like, I'm sure people will work it out for the holidays. And I don't know if people really understand how dire it is, you know, And yes, okay, like Trump's talking about you're going to get two stuffed animals instead of nineteen stuffed animals. I'm like, you're getting zero. Yeah, so
my kids have enough. I mean, I know, same thought here. But small businesses won't make it. The big businesses will be fine, like gosh, iPhones.
No, it's actually like a really big mass clothing line that's not as sort of nice and high quality, like when you think about like a slightly cheaper, much larger
competitive I don't know the names. Maybe the two of you can think of a better analog than not than J Crew, yeah or something like that, Like what do they you know, we just eat some of the costs and they have distribute makers that can they have enough scale that they can force their producers to eat costs and just sort of you know, charge along.
You know, I think for those retailers that have enough cash on the balance sheet. Yeah, maybe it's a risk they're willing to take. I think the other thing that's not understood necessarily about the tariffs is that you pay tariffs to the government basically as soon as the goods hit the US territory.
Right, So there's some sufficial comes and like looks at it.
And says basically, here's your own voice, pay it up, right, and you don't get like your thirty day terms or your sixty day terms that your factories extend to you, because that's actually the selling window that you need to sell your products to your customers. So it's actually a huge cash flow problem as well. Yeah, and you're bringing in these goods in not knowing actually if your customer is willing to eat the price hike. So again it's
a gamble. Big apparel companies with huge cash lots of cash on their bounce sheets.
Yes, they If you're a seller, if you're a factory seller to a small entity in the US, you may be reluctant to just let it ship there because you actually don't know whether that customer is going to be able to take delivery and pay at the very end.
Yeah, that's I think that's a real consequence. That's a real consequence. But I think they're fighting for their survival too. You know, they're going to take something rather than nothing.
Yeah, all right, Sarah Lafleur. It was so good catching up. I wish it was under better circumstances, but I'm glad we finally did that.
Thank you. This was this was a blast. Thank you guys, Thank you so much. That was fantastic, Joe.
That was so fascinating, and I am really glad we finally had Sarah on. It is kind of the perfect moment to talk about the textile clothing business. I hadn't thought of the cash flow issue of actually paying the customs coming. I mean, obviously I knew that companies have to pay the tariffs as things actually come in at the ports, but the issue of like the discrepancy between your selling window and when you actually have to pay that extra tax. I hadn't thought of that.
No, there's all sorts of I mean, there's all sorts of wrinkles. No pun intended that the tariffs are creating. I really liked that episode because, look, we could talk to economists all day long about shortages coming or higher prices. So it's helpful to hear from someone.
In business actually dealing. Actually, yes, all.
Those things that economists are talking about are very real. You know, so much in there that was interesting, you know, starting on that last point that you mentioned, you know, again, a big retailer, like a J crew, they're going to have an easier time sort of smoothing out their cash flows, taking a ri making a bet, ordering a line than a company that's just you know, quarter to quarter for its survival.
This seems to be a recurring theme in a lot of these tariff episodes, right, so we heard it in the gaming industry episode. The smaller players seem like they're suffering or will suffer a lot more than the big guys. And then when we spoke to the Lentil King of Saskatchewan, he seemed, you know, he was kind of sanguine about the whole thing. I guess because he's the biggest Lentil player out there.
Yes, And the fact that it sounds like for AG, the idea of like small AG has sort of been disappearing for a while. I mean, what do you say he's at a family farm at this point in Saskatchewan means having three hundred thousand acres, which you know is
not my conception of a little family farm. But then also, obviously, I guess I was surprised a little bit that there isn't more capacity or market depth in some of these non China countries like a Vietnam, like a Philippines, like a Kim so forth for the types of sewing and cutting that's necessary at this level. And so even at this point for something like clothes, and granted Sarah makes nice high end clothes, that is sort of still China or nowhere.
Yeah, And I guess this is the other theme that keeps coming through that it's just going to be very very hard, slash impossible to try to build up that capacity and expertise in the US. And there's there's no way anyone's going to open, like I don't know, start growing mulberry trees and farming silkworms in the next six months or something like that. So, yeah, buying your silk now for Christmas? Useful bit of advice, Yes, all right, Shall.
We leave nobody say that there is not useful advice on outlock.
That's right. Shall we leave it there?
Let's leave it there.
This has been another episode of the Odd Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
And I'm Joe Wisenthal. You can follow me at The Stalwart. Follow Sarah Lafleur, She's at sm Lafleur. Follow our producers Kerman Rodriguez at Carman armand dash Ol Bennett at Dashbot at Kilbrooks at Kilbrooks. For more odd Loots content, go to Bloomberg dot com slash odd Lots, where we have a daily newsletter and all of our episodes and you can You should check out our discord where people are talking about these topics twenty four to seven. That's discord dot gg slash od Lots.
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